SB 350
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Date of Hearing: July 13, 2015
ASSEMBLY COMMITTEE ON NATURAL RESOURCES
Das Williams, Chair
SB 350 (De León) – As Amended July 8, 2015
SENATE VOTE: 24-14
SUBJECT: Clean Energy and Pollution Reduction Act of 2015
SUMMARY: Enacts the "Clean Energy and Pollution Reduction Act of 2015," which
establishes targets to reduce petroleum use in motor vehicles by 50% by 2030, double the energy
efficiency of buildings by 2030, and increase retail sales of renewable electricity to 50% by
2030.
EXISTING LAW:
Petroleum Reduction:
1) Requires the Air Resources Board (ARB) to adopt and implement motor vehicle emission
standards, in-use performance standards, and motor vehicle fuel specifications for the control
of air contaminants and sources of air pollution which ARB finds necessary, cost effective,
and technologically feasible, unless preempted by federal law.
2) Requires the California Energy Commission (CEC) and ARB to adopt recommendations for
the Governor and Legislature to reduce petroleum dependence [AB 2076 (Shelley), Chapter
936, Statutes of 2000]. The AB 2076 report, "Reducing California's Petroleum Dependence"
(August 2003), recommended the Governor and Legislature (1) adopt a statewide goal of
reducing on-road gasoline and diesel consumption by 15% below 2003 levels by 2020, (2)
work with the California delegation and other states to establish national fuel economy
standards that double fuel efficiency, and (3) establish a goal to increase the use of
nonpetroleum fuels to 20% by 2020 and 30% by 2030.
3) Requires CEC and ARB to adopt a state plan to increase the use of alternative transportation
fuels, including setting alternative fuel goals for 2012, 2017 and 2022 [AB 1007 (Pavley),
Chapter 371, Statutes of 2005]. The AB 1007 "State Alternative Fuels Plan" (December
2007) recommended goals for alternative fuel use of 9% by 2012, 11% by 2017 and 26% by
2022.
4) Requires ARB to adopt regulations that achieve the maximum feasible and cost-effective
reduction of greenhouse gas (GHG) emissions from motor vehicles [AB 1493 (Pavley),
Chapter 200, Statutes of 2002].
5) Requires ARB to adopt a statewide GHG emissions limit equivalent to 1990 levels by 2020
and to adopt rules and regulations to achieve maximum technologically feasible and costeffective GHG emission reductions [AB 32 (Nunez), Chapter 488, Statutes of 2006]. In
2009, ARB adopted a low-carbon fuel standard (LCFS) regulation pursuant to AB 32. The
LCFS requires a reduction in the carbon intensity of California's transportation fuels by at
least 10% by 2020.
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6) Establishes the Alternative and Renewable Fuel and Vehicle Technology Program
(ARFVTP) to support alternative vehicle technologies and fuels as part of the California
Alternative and Renewable Fuel, Vehicle Technology, Clean Air, and Carbon Reduction Act
of 2007 [AB 118 (Nunez), Chapter 750, Statutes of 2007]. The ARFVTP is administered by
the CEC and receives approximately $100 million per year from temporary surcharges on
vehicle and vessel fees. Collection of these fees currently is authorized until 2024. Projects
to improve alternative and renewable low-carbon fuels are eligible for funding.
7) Requires metropolitan planning organizations to include sustainable communities strategies,
as defined, in their regional transportation plans for the purpose of reducing GHG emissions
from transportation [SB 375 (Steinberg), Chapter 728, Statutes of 2008].
Building Efficiency:
8) Requires the CEC to establish regulations to develop and implement a comprehensive
program to achieve greater energy savings in California's existing residential and
nonresidential building stock [AB 758 (Skinner), Chapter 470, Statutes of 2009]. The AB
758 program is targeted at buildings that "fall significantly below" the current Title 24 energy
efficiency standards.
Renewables Portfolio Standard (RPS):
9) Requires "retail sellers" of electricity, i.e., investor-owned utilities (IOUs), energy service
providers (ESPs) and community choice aggregators (CCAs), as well as publicly owned
utilities (POUs), to procure eligible renewable energy resources to meet the following
portfolio targets:
a) 20% on average from January 1, 2011 to December 31, 2013.
b) 25% by December 31, 2016.
c) 33% by December 31, 2020 and each year thereafter.
10) Authorizes the Public Utilities Commission (PUC) to require retail sellers to procure eligible
renewable energy resources in excess of these targets.
11) Provides that eligible renewable generation facilities must use biomass, solar thermal,
photovoltaic, wind, geothermal, renewable fuel cells, small hydroelectric, digester gas,
limited non-combustion municipal solid waste conversion, landfill gas, ocean wave, ocean
thermal or tidal current.
12) Establishes "balanced portfolio" requirements for procurement based on the following three
categories of renewable energy products:
a) Renewable energy interconnected to the grid within, scheduled for direct delivery into, or
dynamically transferred to, a California balancing authority (i.e., real renewable energy
supplied to the California grid, located within or proximate to the state). Of the total
renewable energy contracts executed after June 1, 2010, the following percentages must
fall into this category:
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i) At least 50% for the 2011-2013 compliance period.
ii) At least 65% for the 2014-2016 compliance period.
iii) At least 75% thereafter.
b) Renewable energy where substitute non-renewable energy is used to provide a reliable
delivery schedule into a California balancing authority (i.e., firmed and shaped energy
where substitute energy is used to compensate for delivery problems due to intermittent
generation or inadequate transmission capacity from a remote renewable resource).
c) Renewable energy products not meeting either condition above, including unbundled
renewable energy credits (RECs) (i.e., the original source of renewable energy must be
located within the western grid, but otherwise need not be delivered to the California
grid). Of the total renewable energy contracts executed after June 1, 2010, the following
percentages may fall into this category:
i) Not more than 25% for the 2011-2013 compliance period.
ii) Not more than 15% for the 2014-2016 compliance period.
iii) Not more than 10% thereafter.
13) Requires the CEC to:
a) Certify eligible renewable energy resources according to the criteria in the statute.
b) Design and implement an accounting system to verify compliance, to ensure that
electricity generated by an eligible renewable energy resource is counted only once for
the purpose of meeting the RPS of this state or any other state, to certify RECs produced
by eligible renewable energy resources, and to verify retail product claims in this state or
any other state.
c) Establish a system for tracking and verifying RECs that, through the use of independently
audited data, verifies the generation of electricity associated with each REC and protects
against multiple counting of the same REC.
14) Requires the PUC to establish a cost limit for each IOU according to specified criteria,
requires the PUC to report to the Legislature by 2016 regarding whether IOUs can achieve
33% within the adopted cost limit, authorizes the PUC to revise the cost limit once after 2016
if necessary, and authorizes IOUs to stop procuring renewable energy beyond the cost limit,
unless additional renewable energy can be procured without exceeding a de minimis increase
in rates.
15) Permits retail sellers to take credit for compliance surpluses by requiring the PUC to adopt
"banking" rules permitting retail sellers to apply excess procurement to subsequent
compliance periods. Prohibits banking of procurement associated with contracts of less than
10 years, as well as RECs and other undelivered products.
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16) Excuses retail sellers from enforcement for failure to meet targets if the retail seller
demonstrates that any of the following conditions are beyond its control and will prevent
compliance:
d) Inadequate transmission capacity for delivery of sufficient renewable energy.
e) Permitting, interconnection or other delays for renewable energy projects, or an
insufficient supply of available renewable energy.
f) Unanticipated curtailment of renewable energy necessary to address the needs of a
balancing authority (e.g., the Independent System Operator).
THIS BILL:
1) Directs ARB, in adopting motor vehicle emission, performance and fuel standards pursuant
to its existing authority, to achieve a 50% reduction in petroleum use in motor vehicles by
2030. Requires ARB to prepare a petroleum reduction strategy and implementation plan by
January 1, 2017, and update the plan every three years.
2) Directs CEC to adopt an update to the AB 758 program, by January 1, 2017 and every three
years thereafter, to achieve an overall doubling of the energy efficiency of buildings by
January 1, 2030.
3) Requires the CEC to adopt, implement, and enforce a responsible contractor policy for use
across all ratepayer-funded energy efficiency programs that involve installation or
maintenance, or both installation and maintenance, by building contractors to ensure that
retrofits meet high-quality performance standards and reduce energy savings lost or foregone
due to poor-quality workmanship.
4) Establishes a RPS target of 50% by December 31, 2030 and thereafter for retail sellers and
POUs, including interim targets of 40% by the end of the 2021-2024 compliance period, 45%
by the end of the 2025-2027 compliance period, and 50% by the end of the 2028-2030
compliance period.
5) Requires the PUC to direct each IOU to include in its proposed procurement plan a strategy
for procuring a diverse portfolio of resources that provide a reliable electricity supply,
including renewable energy integration needs, using zero carbon-emitting resources to the
maximum extent reasonable. Requires the net capacity costs of those resources to be
allocated on a fully nonbypassable basis.
6) Removes specified criteria and reporting requirement from the RPS cost limit, instead
directing the PUC to set the cost limit at a level that prevents disproportionate rate impacts.
7) Limits the RPS eligibility of a facility engaged in the combustion of municipal solid waste
located in Stanislaus County to contracts entered into before January 1, 2016.
8) Establishes the following "transportation electrification" provisions:
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a) Requires ARB to identify and adopt appropriate policies to remove regulatory
disincentives facing retail sellers from facilitating the achievement of GHG emission
reductions in other sectors through increased investments in transportation electrification,
including an allocation of GHG emissions allowances to retail sellers to account for
increased emissions in the electric sector from transportation electrification.
b) Requires the PUC, in consultation with the ARB and CEC, to direct IOUs to propose
multiyear programs and investments to accelerate widespread transportation
electrification to reduce dependence on petroleum, meet air quality standards, achieve the
goals set forth in the Charge Ahead California Initiative, and reduce emissions of
greenhouse gases to 40% below 1990 levels by 2030 and to 80% below 1990 levels by
2050. Requires the PUC to approve programs and investments that deploy charging
infrastructure as distribution system costs.
c) Requires the PUC to review data concerning current and future electric transportation
adoption rates and charging infrastructure utilization rates no less than every three years
and prior to any further authorization to collect additional new program costs related to
transportation electrification in ratepayer rates. If market barriers unrelated to the
investment prevent electric transportation from adequately utilizing available charging
infrastructure, the PUC shall not permit additional investments without adequate
assurance that the investments would not result in stranded costs recoverable from
ratepayers.
d) Establishes a new RPS compliance "offramp" for unanticipated increases in retail sales
due to transportation electrification, if the waiver would not result in an increase in GHG
emissions. In making a finding, the PUC must consider whether transportation
electrification significantly exceeded forecasts in that retail seller’s service territory and
whether the retail seller has taken reasonable measures to procure sufficient resources to
account for the unanticipated increases.
9) Authorizes "procurement entities," subject to PUC authorization, and POUs to procure an
unspecified percentage of retail sales of onsite generation within the area served by the
procurement entity or POU to serve local electricity needs. Requires onsite renewable
generation to be certified by the CEC pursuant to its RPS tracking and verification
procedures and prohibits estimation of energy production from onsite generation to
demonstrate RPS compliance.
10) Requires the PUC and CEC to do all of the following in furtherance of meeting the state’s
clean energy and pollution reduction objectives:
a) Take into account the use of distributed generation to the extent that it provides economic
and environmental benefits in disadvantaged communities.
b) Take into account the opportunities to decrease costs and increase benefits, including
pollution reduction and grid integration, using technologies with zero onsite GHG
emissions.
c) Where feasible, authorize procurement of resources to provide grid reliability services
that minimize reliance on system power and fossil fuel resources and, where feasible,
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cost-effective, and consistent with other state policy objectives, increase the use of largeand small-scale energy storage with a variety of technologies, targeted energy efficiency,
demand response, eligible renewable energy resources, or other technologies with zero
onsite greenhouse gas emissions to protect system reliability.
d) Review technology incentive, research, development, deployment, and market facilitation
programs overseen by the PUC and CEC and make recommendations to advance state
clean energy and pollution reduction objectives and provide benefits to disadvantaged
communities.
e) To the extent feasible, give first priority to the manufacture and deployment of clean
energy and pollution reduction technologies that create employment opportunities,
including high wage, highly skilled employment opportunities, and increased investment
in the state.
f) Establish a publicly available tracking system to provide up-to-date information on
progress toward meeting the clean energy and pollution reduction goals of the Clean
Energy and Pollution Reduction Act of 2015.
g) Establish an advisory group consisting of representatives from disadvantaged
communities to review and advise on programs proposed to achieve clean energy and
pollution reduction and determine whether those proposed programs will be effective and
useful in disadvantaged communities.
FISCAL EFFECT: According to the Senate Appropriations Committee:

First year costs of $440,000 and $400,000 ongoing from various special funds to ARB to
create a petroleum use baseline and to implement necessary measures to reduce use.

Unknown cost pressures to current programs from various special funds to achieve a 50%
petroleum reduction.

Annual costs of $7.24 million from the General Fund for the CEC for ongoing updates of its
energy efficiency plans for existing buildings and to implement the plans.

Annual costs of $900,000 from the Energy Resources Program Account (General Fund) for
the CEC for new responsibilities ensuring compliance with RPS standards by the POUs.

Annual costs of $2.3 million for five years from the Public Utilities Reimbursement Account
(special) for PUC contract needs.

Annual costs of $471,000 for two years and $157,000 in the third year from the Public
Utilities Reimbursement Account (special) for PUC proceedings to adjust existing RPS and
Long Term Procurement Plan programs.

Ongoing staffing needs of $350,000 annually from the Public Utilities Reimbursement
Account (special) for PUC staffing needs for ongoing enforcement of the higher RPS
standards.

Unknown ratepayer costs to the General Fund and various special funds to the state as a
ratepayer of electricity to the extent that electricity prices may be affected by increasing the
RPS standard.
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
Unknown cost pressures to the Public Utilities Reimbursement Account (special) and the
Energy Resources Program Account (General Fund) to the PUC and the CEC to review
renewable integration needs and to consider grid integration in proceedings implementing
RPS requirements.
COMMENTS:
1) Governor's goals. In his January 5, 2015 Inaugural Address, Governor Brown announced
the following "objectives for 2030 and beyond":
Toward that end, I propose three ambitious goals to be accomplished within the next 15
years:



Increase from one-third to 50% our electricity derived from renewable sources;
Reduce today’s petroleum use in cars and trucks by up to 50%; and,
Double the efficiency of existing buildings and make heating fuels cleaner.
We must also reduce the relentless release of methane, black carbon and other potent
pollutants across industries. And we must manage farm and rangelands, forests and
wetlands so they can store carbon. All of this is a very tall order. It means that we
continue to transform our electrical grid, our transportation system and even our
communities.
I envision a wide range of initiatives: more distributed power, expanded rooftop solar,
micro-grids, an energy imbalance market, battery storage, the full integration of
information technology and electrical distribution and millions of electric and low-carbon
vehicles. How we achieve these goals and at what pace will take great thought and
imagination mixed with pragmatic caution. It will require enormous innovation, research
and investment. And we will need active collaboration at every stage with our scientists,
engineers, entrepreneurs, businesses and officials at all levels.
Taking significant amounts of carbon out of our economy without harming its vibrancy is
exactly the sort of challenge at which California excels. This is exciting, it is bold and it
is absolutely necessary if we are to have any chance of stopping potentially catastrophic
changes to our climate system.
2) RPS. The RPS is the centerpiece of California's effort to develop a clean energy system and
reduce pollution and GHG emissions associated with electricity consumption. The original
RPS bill, SB 1078 (Sher), Chapter 516, Statutes of 2002, set a goal of 20% by 2017. SB 107
(Simitian), Chapter 464, Statutes of 2006, accelerated the deadline for 20% to 2010. SBX1 2
(Simitian), Chapter 1, Statutes of 2011-12 First Extraordinary Session, codified the current
33% by 2020 RPS target and also established product content categories (or "buckets"),
which place the highest value (Bucket 1) on renewable energy that is directly delivered into
California because it has the greatest economic, environmental and reliability benefits.
Since the RPS was enacted, IOUs have advanced beyond their 2002 average starting point of
12% renewables. According to the PUC's RPS reports, IOUs' actual RPS procurement in
2013 was 23.8% for Pacific Gas and Electric (PG&E), 21.6% for Southern California Edison
(SCE), and 23.6% for San Diego Gas & Electric (SDG&E). The PUC reports also show that
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the IOUs are on track to meet the RPS requirement of 25% renewables by 2016 and are wellpositioned to meet the 33% requirement by 2020. RPS procurement currently under contract
for 2020 is 31.3% for PG&E, 23.5% for SCE, and 38.8% for SDG&E.
3) P.R. flak. With respect to petroleum reduction, in contrast to the detailed RPS provisions,
this bill takes a "less is more" approach, simply embedding the 50% target within ARB's
existing authority to adopt motor vehicle emission, performance and fuel standards to control
air pollution (as opposed to adding the target to the division added by AB 32 governing GHG
emissions). This has sparked a lively debate about what exactly ARB might do to achieve
the target.
In fact, there seems to be little real dispute about what the measures are. Information
provided to the committee by oil companies, automakers and environmental groups is
remarkably similar. The principal existing GHG/petroleum reduction measures are vehicle
miles traveled (VMT) reduction through SB 375, GHG standards for light-duty vehicles
through AB 1493, as well as alternative/zero emission vehicles (collectively Advanced Clean
Cars), alternative/low-carbon fuels through LCFS and incentive programs (e.g., AB 118) and
a declining cap on transportation fuel emissions at the supplier level through the cap-andtrade regulation.
The real question is how much more needs to done to achieve 50% by 2030. A recent
analysis prepared by Sierra Research for the Alliance of Automobile Manufacturers found
that "existing regulatory programs are expected to reduce petroleum consumption in
California by about 31% from 2015 to 2030. The reduction in VMT growth (from 17% to
4%) assumed by CARB staff…would further reduction petroleum consumption (to 41% by
2030)."
The main ingredients to increase petroleum reduction to 50% by 2030 appear to be a
combination of reduced VMT growth, more ZEVs, more stringent GHG standards for lightduty vehicles, and increased use of alternative fuels. The proposition that achieving a 50%
petroleum reduction will require banning or rationing petroleum is a red herring. Then again,
so is the idea that the goal can be achieved without major, unprecedented investments in
transportation infrastructure and changes in consumer behavior.
As to whether this bill gives ARB "unfettered" authority, in fact the bill does not change
ARB's regulatory authority. ARB has authority to regulate motor vehicle emission,
performance and fuel standards, and those regulations must be cost-effective, technologically
feasible, and consistent with federal law. This bill establishes a target that will require ARB
to push harder, but still within the boundaries of existing law. ARB's actions are further
fettered by administrative procedures governing adoption of regulations, the California
Environmental Quality Act, annual review and approval of its budget by the Legislature,
Senate confirmation of its board members, and, ultimately, judicial review.
Some of the conjecture surrounding this bill's petroleum reduction provision could be
addressed by articulating in more detail what it's about and not about. For example,
achieving long-term reductions without loss of mobility, a combination of measures in
planning, regulation and incentives, not banning petroleum, and assure adequate reporting
and oversight. The author and the committee may wish to consider amending the bill to spell
out a more detailed approach as follows:
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




Setting a baseline year or fuel volume for the 50% reduction.
Providing direction as to which measures to pursue.
Requiring more robust reporting and oversight.
Providing direction that the target should be met through petroleum alternatives,
improved transit, efficiency and planning-based VMT reductions, which don't sacrifice
mobility or ban/ration petroleum.
Exploring offramps to address unforeseen complications.
4) Natural gas vehicle provisions are misplaced. The July 8 amendments add several
provisions to address increased electricity demand resulting from transportation
electrification, including a section relating to planning and cost recovery for IOU investment
in electric vehicle charging infrastructure. In the findings of this section, "natural gas
vehicles as a short-term measure" along with "fuel cell vehicles" are listed (on page 43, lines
3-4 and 27-30), even though the operative provisions of the section only address electric
vehicle charging. The reference to natural gas vehicles in this section has provoked
controversy, both from environmental advocates, who don't view natural gas vehicles as
consistent with the state's long-term climate goals, and natural gas vehicles advocates, who
don't like declaring that natural gas vehicles are strictly a "short-term" measure. The
controversy could be resolved by simply eliminating these findings, which are not essential,
or amending them to refer to "clean vehicles" rather than listing electric, natural gas, and fuel
cell vehicles.
REGISTERED SUPPORT / OPPOSITION:
Support
American Academy of Pediatrics – California
American Cancer Society Cancer Action Network, California
American Lung Association in California
Asthma Coalition of Los Angeles County
Audubon California
Autodesk
Baz Allergy, Asthma and Sinus Center
Ben & Jerry’s
Bonnie J. Adario Lung Cancer Foundation
BOSCH
Breathe California
Business for Innovative Climate & Energy Policy
CALSTART
California Association of Electrical Workers
California Biodiesel Alliance
California Black Health Network
California Catholic Conference
California Conference of Directors of Environmental Health
California Energy Efficiency Industry Council
California League of Conservation Voters
California Energy Storage Alliance
California Nurses Association
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California Pan Ethnic Health Network
California Public Health Association - North
California State Pipe Trades Council
California Thoracic Society
California Voices for Progress
Californians Against Waste
Center for Climate Change and Health; Public Health Institute
Central California Asthma Collaborative
Ceres
ChargePoint
Clean Tech San Diego
Clean Power Campaign
Clean Water Action
Climate Action
Climate Parents
Climate Ready Solutions
Coalition for Clean Air
Coalition of California Utility Employees
Coastal Environmental Rights Foundation
Code REDD
Consumer Attorneys of California
Consumers Union
Dignity Health
Doctors for Climate Health
Eagle Creek
Environment California
Environmental Defense Fund
Gaia Development Services
Gap
Green Star Solution
Health Care Without Harm
Large-Scale Solar Association
Levi Strauss & Co.
Medical Advocates for Healthy Air
Mercury Press International
Mountain Rider’s Alliance
National Parks Conservation Association
Natural Resources Defense Council
New Moon Girl Media
Nextgen Climate
North Face
Pacific Forest Trust
Physicians for Social Responsibility – Los Angeles
Physicians for Social Responsibility – San Francisco Bay Area Chapter
Planning and Conservation League
Proof Lab Surf Shop
Public Health Institute
Quest
Refill Shoppe
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Regional Asthma Management and Prevention (RAMP)
Rio Theater
San Francisco Asthma Task Force
Santa Clara County Medical Society
Sierra Business Council
Sierra Club California
Sirius Mac Solutions
SmartWool
Sonoma County Asthma Coalition
Solar Energy Industries Association
South Coast Air Quality Management District
State Building and Construction Trades Council of California
Sungevity
Thinkshift Communications
Transform
Trust for Public Lands
U.S. Green Building Council
Union of Concerned Scientists
Voices for Progress
West Marin Environmental Action Committee
Western States Sheet Metal Workers
31 individuals
Opposition
Agricultural Council of California
American Alliance Authority & Compliance
American Alliance Drug Testing
Associated Builders and Contractors of California
Associated General Contractors
Building Owners and Managers Association
California Association of Nurseries and Garden Centers
California Business Properties Association
California Chamber of Commerce
California Concrete Bumpers Alliance
California Construction Trucking Association
California Cotton Ginners Association
California Cotton Growers Association
California Dairies
California Farm Bureau Federation
California Fresh Fruit Association
California Independent Oil Marketers Association
California Independent Petroleum Association
California Manufacturers & Technology Association
California Metals Coalition
California Retailers Association
CalTax
Chemical Industry Council of California
Coalition of American-Latino Truckers
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Family Business Association
Far West Equipment Dealers Association
Food 4 Less/Rancho San Miguel
Foster Farms
Fullerton Chamber of Commerce
Harris Farms
Heavy Haul Conference
Industrial Environmental Association
International Council of Shopping Centers
Kern County Board of Supervisors
NAOIP – Commercial Real Estate Development Association
National Federation of Independent Business
National Tank Truck Carriers
Orange County Business Council
San Joaquin County Hispanic Chamber of Commerce, Board of Directors
Simi Valley Chamber of Commerce
Southwest California Legislative Council
Torrance Chamber of Commerce
United
Valley Industry and Commerce Association (VICA)
West Coast Lumber and Building Material Association
Western Aerosol Information Bureau
Western Agricultural Processors Association
Western Growers Association
Western Plant Health Association
Western States Petroleum Association
Western Trucking Alliance
Analysis Prepared by: Lawrence Lingbloom / NAT. RES. / (916) 319-2092