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SB-1440 Energy: biomethane: biomethane procurement program.(2017-2018)

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Date Published: 07/03/2018 09:00 PM
SB1440:v93#DOCUMENT

Amended  IN  Assembly  July 03, 2018
Amended  IN  Assembly  June 14, 2018
Amended  IN  Senate  May 25, 2018
Amended  IN  Senate  April 30, 2018
Amended  IN  Senate  April 09, 2018
Amended  IN  Senate  March 22, 2018

CALIFORNIA LEGISLATURE— 2017–2018 REGULAR SESSION

Senate Bill No. 1440


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

February 16, 2018


An act to amend Section 25420 of add Section 39730.9 to the Health and Safety Code, to amend Section 40106 of the Public Resources Code, and to add Section 2814 to, and to add Chapter 11 (commencing with Section 2898) to Part 2 of Division 1 of, the Public Utilities Code, relating to energy.


LEGISLATIVE COUNSEL'S DIGEST


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

Existing law requires the Office of Environmental Health Hazard Assessment, in consultation with the State Air Resources Board (state board), the Department of Toxic Substances Control, the Department of Resources Recycling and Recovery, and the California Environmental Protection Agency, to compile a list of constituents of concern that could pose risks to human health and that are found in biogas, as defined, at concentrations that significantly exceed the concentrations of those constituents in natural gas. Existing law defines biomass conversion for the purposes of the California Integrated Waste Management Act of 1989, which requires each city, county, and regional agency, if any, to develop a source reduction and recycling element of an integrated waste management plan.

This bill would revise the definitions of biogas and biomass conversion for these purposes.

Under existing law, the Public Utilities Commission (PUC) has regulatory authority over public utilities, including electrical corporations and gas corporations. Existing law requires the commission to authorize the construction of an interconnection with existing transmission facilities for gas or electricity by a private energy producer upon application of the private energy producer if the commission makes specified findings. Existing law requires the private energy producer to provide and to pay the total cost of the interconnection as well as other specified costs. Under existing law, a violation of the Public Utilities Act or any order, decision, rule, direction, demand, or requirement of the commission is a crime.
This bill would amend the act to require a gas corporation that offers electrical or natural gas service and accepts an interconnection application from a private energy producer to provide the private energy producer with a sourced line-item justification, as defined, for the overall estimated cost of the interconnection. By placing additional requirements upon local publicly owned utilities, this bill would impose a state-mandated local program. Because a violation of this requirement would be a crime, the bill would impose a state-mandated local program by creating a new crime.
Existing law requires state agencies to consider and, as appropriate, adopt policies and incentives to significantly increase the sustainable production and use of renewable gas. Existing law requires the PUC, in consultation with the State Energy Resources Conservation and Development Commission and the state board, to consider additional policies to support the development and use in the state of renewable gas that reduce short-lived climate pollutants in the state.
This bill would require the state board, in consultation with the PUC, to adopt a regulation to establish a requirement that all gas corporations with over 100,000 customers, except publicly owned gas utilities, customers procure biomethane consistent with specified conservation requirements and policies in current law and other requirements. requirements, including a requirement that these gas corporations collectively procure 32 billion cubic feet of biomethane annually by January 1, 2030. This bill would require the state board, in consultation with the PUC, to update the biomethane procurement program’s requirements, review this biomethane procurement regulation, and report to the Legislature on the progress toward meeting those requirements, every 5 years. This bill would require the commission to allow recovery in the rate base of the just and reasonable investment required to interconnect biomethane production to the existing pipeline system, as specified. on or before January 1, 2025.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: YES  

The people of the State of California do enact as follows:


SECTION 1.Section 25420 of the Health and Safety Code is amended to read:
25420.

For purposes of this chapter, the following definitions apply:

(a)“Biogas” means gas that is produced from the anaerobic decomposition of organic material or the noncombustion thermal conversion of eligible biomass feedstock consistent with Section 40106 of the Public Resources Code.

(b)“Biomethane” means biogas that meets the standards adopted pursuant to subdivisions (c) and (d) of Section 25421 for injection into a common carrier pipeline.

(c)“Board” means the State Air Resources Board.

(d)“CalRecycle” means the Department of Resources Recycling and Recovery.

(e)“Commission” means the Public Utilities Commission.

(f)“Common carrier pipeline” means a gas conveyance pipeline, located in California, that is owned or operated by a utility or gas corporation, excluding a dedicated pipeline.

(g)“Dedicated pipeline” means a conveyance of biogas or biomethane that is not part of a common carrier pipeline system, and which conveys biogas from a biogas producer to a conditioning facility or an electrical generation facility.

(h)“Department” means the Department of Toxic Substances Control.

(i)“Gas corporation” has the same meaning as defined in Section 222 of the Public Utilities Code and is subject to rate regulation by the commission.

(j)“Hazardous waste landfill” means a landfill that is a hazardous waste facility, as defined in Section 25117.1.

(k)“Office” means the Office of Environmental Health Hazard Assessment.

(l)“Person” means an individual, trust, firm, joint stock company, partnership, association, business concern, limited liability company, or corporation. “Person” also includes any city, county, district, and the state or any department or agency thereof, or the federal government or any department or agency thereof to the extent permitted by law.

SEC. 2.Section 40106 of the Public Resources Code is amended to read:
40106.

(a)“Biomass conversion” means the production of heat, fuels, or electricity by the controlled combustion of, or the use of other noncombustion thermal conversion technologies on, the following materials, when separated from other solid waste:

(1)Agricultural crop residues.

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

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

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

(5)Nonrecyclable pulp or nonrecyclable paper materials.

(6)Livestock waste.

(7)Municipal sewage sludge or biosolids.

(8)Diverted organic waste.

(9)Organic industrial food processing residues.

(b)“Biomass conversion” does not include the controlled combustion of recyclable pulp or recyclable paper materials, or materials that contain industrial sludge, medical waste, hazardous waste, or either high-level or low-level radioactive waste.

(c)For purposes of this section, “nonrecyclable pulp or nonrecyclable paper materials” means either of the following, as determined by the department:

(1)Paper products or fibrous materials that cannot be technically, feasibly, or legally recycled because of the manner in which the product or material has been manufactured, treated, coated, or constructed.

(2)Paper products or fibrous materials that have become soiled or contaminated and as a result cannot be technically, feasibly, or legally recycled.

SECTION 1.

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

39730.9.
 (a) For purposes of this section:
(1) “Biomethane” means methane produced from an organic waste feedstock that meets the standards adopted pursuant to subdivisions (c) and (d) of Section 25421 for injection into a common carrier pipeline that is either:
(A) Produced from the anaerobic decomposition of organic material, including codigestion, or
(B) Produced from the noncombustion thermal conversion of the following materials, when separated from other waste.
(i) Agricultural crop residues.
(ii) Bark, lawn, yard, and garden clippings.
(iii) Leaves, silvicultural residue, and tree and brush pruning.
(iv) Wood, wood chips, and wood waste.
(v) Nonrecyclable pulp or nonrecyclable paper materials.
(vi) Livestock waste.
(vii) Municipal sewage sludge or biosolids.
(viii) Diverted organic waste.
(ix) Organic industrial food processing residues.
(2) “Codigestion” means the anaerobic digestion of multiple biodegradable substrates or feedstocks.
(b) In furtherance of achieving the emission reductions required by this chapter, on or before January 1, 2021, the state board shall adopt a regulation requiring the procurement of biomethane.
(c) The state board shall consult with the Public Utilities Commission to develop specific procurement targets for each gas corporation, as defined in Section 222 of the Public Utilities Code, with over 100,000 customers, so that each of these gas corporations procures a proportionate share of a total of 32 billion cubic feet of biomethane annually by January 1, 2030.
(d) In addition to the procurement targets adopted pursuant to subdivision (c), the state board may adopt procurement requirements for precommercial biomethane technologies of up to two billion cubic feet annually by January 1, 2030. The state board and the Public Utilities Commission shall limit the cost impacts of this subdivision to the maximum extent possible while also encouraging the development of new technologies to generate biomethane and reduce methane emissions.
(e) In adopting a biomethane procurement regulation pursuant to subdivision (b), the state board shall:
(1) Consider the recommendations developed pursuant to Section 39730.8.
(2) Ensure the regulation is consistent with both of the following:
(A) The organic waste diversion requirements of Section 39730.6
(B) The requirements of the California Renewables Portfolio Standard Program (Article 16 (commencing with Section 399.11) of Chapter 2.3 of Part 1 of the Public Utilities Code), including the requirements of Section 399.12.6, regardless of the end use of the biomethane.
(3) (A) Adopt targets for specific sectors, including, but not limited to, landfill gas, livestock waste, diverted organic waste, wastewater treatment, and organic industrial food processing.
(B) In adopting the targets pursuant to this paragraph, the state board shall do both of the following:
(i) Adopt a declining target for biomethane from landfill gas in accordance with achieving the goals outlined in Section 39730.6
(ii) Prioritize feedstocks with the highest reductions in methane emissions, while ensuring a balanced and diverse overall portfolio of resources and an increase in the beneficial use of methane from organic sources.
(4) Ensure the regulation achieves emissions reductions that are cost effective compared to other emissions reduction strategies.
(f) The state board, in consultation with the Public Utilities Commission, shall ensure all of the following:
(1) Consistency with the recommendations of the California Council on Science and Technology pursuant to Section 784.1 of the Public Utilities Code.
(2) That each gas corporation meets its biomethane procurement requirements through contracts with terms of no less than 10 years duration, formed pursuant to a competitive solicitation process or a bilateral agreement reviewed and approved by the Public Utilities Commission.
(3) That gas corporations do not unfairly compete with nonutility enterprises.
(g) The state board, in consultation with the Public Utilities Commission, shall review the biomethane procurement regulation adopted pursuant to subdivision (b), and report to the Legislature, pursuant to Section 9795 of the Government Code, on the progress toward meeting the regulation’s requirements on or before January 1, 2025.

SEC. 3.SEC. 2.

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

2814.
 (a) A gas corporation that offers natural gas service and accepts an interconnection application from a private energy producer shall provide the private energy producer with a sourced line-item justification for the overall estimated cost of the interconnection.
(b) For the purposes of this section, “sourced line-item justification” means a document that, on separate lines, breaks down the estimated cost of the interconnection, including, but not limited to, the price of labor, materials, and third-party charges.

SEC. 4.Chapter 11 (commencing with Section 2898) is added to Part 2 of Division 1 of the Public Utilities Code, to read:
11.Biomethane Procurement Program
2898.

For the purposes of this chapter:

(a)“Biogas” has the same definition as in Section 25420 of the Health and Safety Code.

(b)“Biomethane” means biogas that meets the standards adopted pursuant to subdivisions (c) and (d) of Section 25421 of the Health and Safety Code for injection into a common carrier pipeline.

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

2898.1.

(a)On or before January 1, 2020, the State Air Resources Board, in consultation with the commission, shall adopt a biomethane procurement requirement for each gas corporation with over 100,000 customers, to annually procure its proportionate share of a total of 32 billion cubic feet of biomethane statewide until January 1, 2030. The program shall be known and may be cited as the Biomethane Procurement Program. The Biomethane Procurement Program requirements shall be consistent with all of the following:

(1)The organic waste diversion requirement of Section 39730.6 of the Health and Safety Code.

(2)The requirements of the California Renewables Portfolio Standard Program (Article 16 (commencing with Section 399.11) of Chapter 2.3 of Part 1).

(3)The requirements of Section 399.12.6.

(b)In adopting the biomethane procurement requirements, the State Air Resources Board and the commission shall ensure all of the following:

(1)Appropriate allocations to meet the requirements of Section 39730 of the Health and Safety Code and state policies to reduce greenhouse gases.

(2)Consistency with the recommendations of the California Council on Science and Technology pursuant to Section 784.1.

(3)A gas corporation shall meet the biomethane procurement program’s requirements through contracts with terms of no fewer than 10 years, formed pursuant to a competitive solicitation process or a bilateral agreement.

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

(B)In adopting the targets pursuant to this paragraph, the State Air Resources Board shall:

(i)Adopt a declining target for landfill gas in accordance with achieving the goals outlined in Section 39730.6 of the Health and Safety Code.

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

(C)The State Air Resources Board shall allow the use of codigestion to meet the targets for specific sectors adopted pursuant to this paragraph.

(5)Additions to the environmental benefits of existing state biogas or biomethane programs, rules, or regulations, including, but not limited to, furthering the purposes of methane reductions required in Section 39730.5 of the Health and Safety Code.

(6)That utilities do not unfairly compete with nonutility enterprises.

(c)(1)The overall procurement mandate for biomethane across all commercially available sectors shall be determined by the State Air Resources Board, in consultation with the commission, and initially be set to 32 billion cubic feet.

(2)The overall procurement mandate for biomethane generated using nascent technologies and other technologies not included in paragraph (1), including those using forest and agricultural biomass as a fuel source consistent with Section 40106 of the Public Resources Code, shall initially be set to up to two billion cubic feet. The State Air Resources Board and the commission shall limit the cost impacts of this paragraph to the maximum extent possible while also encouraging the development of new technologies to generate biomethane.

(d)The State Air Resources Board, in consultation with the commission, shall review and, if necessary, update the biomethane procurement program requirements, and report to the Legislature, pursuant to Section 9795 of the Government Code, on the progress toward meeting the program requirements, at least once every five years, with the first review concluding before January 1, 2025.

2898.2.

(a)The commission shall approve, or modify and approve, a gas corporation’s application to recover in the rate base the just and reasonable investment required to interconnect biomethane production to the existing pipeline system, including the just and reasonable investment for the point of receipt and any downstream facilities required to facilitate the receipt of biomethane, with full cost recovery from the gas corporation’s customers, including both core and noncore customers.

(b)Any costs incurred by a gas corporation to comply with the biomethane procurement program’s requirements that are in excess of the resale value of the biomethane it procured shall be allocated as a fully nonbypassable fixed charge or a nonbypassable demand differentiated fixed charge to the gas corporation’s customers, including both core and noncore customers, subject to the commission’s authority to determine just and reasonable expenditures pursuant to Article 1 (commencing with Section 451) of the Public Utilities Code.

(c)Consistent with this section, the investments shall be recoverable in rates and considered a public good to all classes of ratepayers and in the interests of all classes of ratepayers.

(d)In order to prevent unfair competition by the utility against nonutility enterprises, the commission shall consider modifying and extending the monetary incentive program for biomethane projects adopted in Decision 15-06-029 (June 11, 2015), Decision Regarding the Costs of Compliance with Decision 14-01-034 and Adoption of Biomethane Promotion Policies and Program, to provide equal benefits to projects under that program and this section.

(e)The commission shall require 15 percent of revenues received annually by a gas corporation as a result of the direct allocation of greenhouse gas allowances to natural gas suppliers, pursuant to subdivision (f) of Section 95890 of Title 17 of the California Code of Regulations, to be used to offset the costs of procuring biomethane to meet the requirements of this chapter.

(f)Notwithstanding any other provision of this chapter, both of the following shall apply:

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

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

SEC. 5.

No reimbursement is required by this act pursuant to Section 6 of Article XIII B of the California Constitution because a local agency or school district has the authority to levy service charges, fees, or assessments sufficient to pay for the program or level of service mandated by this act, within the meaning of Section 17556 of the Government Code.

SEC. 3.

 No reimbursement is required by this act pursuant to Section 6 of Article XIII B of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIII B of the California Constitution.