The California Global Warming Solutions Act of 2006 designates the State Air Resources Board as the state agency charged with monitoring and regulating sources of emissions of greenhouse gases. Existing law requires all moneys, except for fines and penalties, collected by the State Air Resources Board from the auction or sale of allowances as part of a market-based compliance mechanism relative to reduction of greenhouse gas emissions, commonly known as cap and trade revenues, to be deposited in the Greenhouse Gas Reduction Fund, and to be used, upon appropriation by the Legislature, for specified purposes, including the reduction of greenhouse gas emissions associated with water use and supply.

This bill would include reduction of greenhouse gas emissions associated with water treatment among the investments that are eligible for funding from the Greenhouse Gas Reduction Fund. The bill would also make legislative findings and declarations, and a statement of legislative intent, with regard to the nexus between water and energy and water and reduction of greenhouse gas emissions.

This bill would require the State Energy Resources Conservation and Development Commission, in cooperation with the State Water Resources Control Board, the State Air Resources Board, the Public Utilities Commission, and the Department of Water Resources Resources, to conduct a study of water-related energy use in California.

This bill would require the State Water Resources Control Board, upon an appropriation from the Greenhouse Gas Reduction Fund and in cooperation with the State Energy Resources Conservation and Development Commission, the State Air Resources Board, the Public Utilities Commission, and the Department of Water Resources Resources, to establish a grant and loan program for water projects that result in the net reduction of water-related greenhouse gas emissions.

The California Global Warming Solutions Act of 2006 designates the State Air Resources Board as the state agency charged with monitoring and regulating sources of emissions of greenhouse gases. Existing law requires all moneys, except for fines and penalties, collected by the State Air Resources Board from the auction or sale of allowances as part of a market-based compliance mechanism relative to reduction of greenhouse gas emissions, commonly known as cap and trade revenues, to be deposited in the Greenhouse Gas Reduction Fund, and to be used, upon appropriation by the Legislature, for specified purposes, including the reduction of greenhouse gas emissions associated with water use and supply.

This bill would include reduction of greenhouse gas emissions associated with water treatment among the investments that are eligible for funding from the Greenhouse Gas Reduction Fund. The bill would also make legislative findings and declarations, and a statement of legislative intent, with regard to the nexus between water and energy and water and reduction of greenhouse gas emissions.

The California Global Warming Solutions Act of 2006 designates the State Air Resources Board as the state agency charged with monitoring and regulating sources of emissions of greenhouse gases. Existing law requires all moneys, except for fines and penalties, collected by the State Air Resources Board from the auction or sale of allowances as part of a market-based compliance mechanism relative to reduction of greenhouse gas emissions, commonly known as cap and trade revenues, to be deposited in the Greenhouse Gas Reduction Fund, and to be used, upon appropriation by the Legislature, for specified purposes, including the reduction of greenhouse gas emissions associated with water use and supply.

This bill would require the state board, in cooperation with various other agencies, to develop an emissions inventory of greenhouse gas emissions from the water system in the state, using best available data. The bill would include reduction of greenhouse gas emissions associated with water treatment among the investments that are eligible for funding from the Greenhouse Gas Reduction Fund. The bill would also make legislative findings and declarations, and a statement of legislative intent, with regard to the nexus between water and energy and water and reduction of greenhouse gas emissions.

Existing law designates the State Air Resources Board as the state agency charged with monitoring and regulating sources of emissions of greenhouse gases. Existing law requires all moneys, except for fines and penalties, collected by the State Air Resources Board from the auction or sale of allowances as part of a market-based compliance mechanism relative to reduction of greenhouse gas emissions, commonly known as cap and trade revenues, to be deposited in the Greenhouse Gas Reduction Fund, and to be used, upon appropriation by the Legislature, for specified purposes, including the reduction of greenhouse gas emissions associated with water use and supply.

This bill would require the state board, in cooperation with various other agencies, to develop an emissions inventory of greenhouse gas emissions from the water system in the state, using best available data. The bill would provide water recycling, wastewater treatment, water end-use efficiency, water technology improvements, best management practices, and other projects that reduce water system greenhouse gas emissions shall be include reduction of greenhouse gas emissions associated with water treatment among the investments that are eligible for funding from the Greenhouse Gas Reduction Fund. The bill would also make legislative findings and declarations, and a statement of legislative intent, with regard to the nexus between water and energy and water and reduction of greenhouse gas emissions.

Existing law designates the State Air Resources Board as the state agency charged with monitoring and regulating sources of emissions of greenhouse gases. Existing law requires all moneys, except for fines and penalties, collected by the State Air Resources Board from the auction or sale of allowances as part of a market-based compliance mechanism relative to reduction of greenhouse gas emissions, commonly known as cap and trade revenues, to be deposited in the Greenhouse Gas Reduction Fund, and to be used, upon appropriation by the Legislature, for specified purposes.

This bill would require the state board, in cooperation with various other agencies, to develop an emissions inventory of greenhouse gas emissions from the water system in the state, using best available data. The bill would provide water recycling, wastewater treatment, water end-use efficiency, water technology improvements, best management practices, and other projects that reduce water system greenhouse gas emissions shall be eligible for funding from the Greenhouse Gas Reduction Fund. The bill would also make legislative findings and declarations, and a statement of legislative intent, with regard to the nexus between water and energy and water and reduction of greenhouse gas emissions.

(2)Existing law continuously appropriates specified portions of the annual proceeds in the Greenhouse Gas Reduction Fund to various programs including 20% for the Affordable Housing and Sustainable Communities Program, administered by the Strategic Growth Council. Existing law specifies the objectives for the program and identifies categories of projects eligible for funding under this program.

This bill would require the council, in implementing these provisions, to give special consideration to awarding funds to eligible projects that, in addition to existing objectives and goals, would also result in reduced energy use by a water supplier, an end user of water, or both. greenhouse gas emissions by the water system in the state.

(3)The Integrated Regional Water Management Planning Act authorizes a regional water management group to prepare an integrated regional water management plan, in accordance with certain procedures, for the implementation or operation of specified qualified projects or programs pertaining to water supply, water quality, or related matters. The act defines regional projects or programs as projects or programs identified in an integrated regional water management plan that accomplish specified water-related goals, including an increase in water supplies through the use of certain means.

This bill would specifically include projects or programs that reduce the greenhouse gas emissions from energy used to acquire, transport, treat, or distribute water as a regional project or program.

(4)Existing law, the Water Quality, Supply, and Infrastructure Improvement Act of 2014, approved by the voters as Proposition 1 at the November 4, 2014, statewide general election, authorizes the issuance of general obligation bonds in the amount of $7,545,000,000 to finance a water quality, supply, and infrastructure improvement program. The bond act provides that the sum of $810,000,000 is to be available, upon appropriation by the Legislature, for expenditures on, and competitive grants and loans to, projects that are included in and implemented in, an adopted integrated regional water management plan and respond to climate change and contribute to regional water security. The bond act authorizes the use of $100,000,000 of those funds for direct expenditures, and for grants and loans, for certain water conservation and water-use efficiency plans, projects, and programs.

This bill, in implementing the direct expenditures, grants, and loans for these water conservation and water-use efficiency plans, projects, and programs, would require special consideration be given to expenditures, grants, and loans that would result in reduced energy use by the water supplier, end user of the water, or both. greenhouse gas emissions.

(5)The bill would make legislative findings and declarations, and a statement of legislative intent, with regard to the nexus between water and energy and water and reduction of greenhouse gas emissions.

(1)Existing law requires all moneys, except for fines and penalties, collected by the State Air Resources Board from the auction or sale of allowances as part of a market-based compliance mechanism relative to reduction of greenhouse gas emissions, to be deposited in the Greenhouse Gas Reduction Fund. Existing law continuously appropriates specified portions of the annual proceeds in the Greenhouse Gas Reduction Fund to various programs including 20% for the Affordable Housing and Sustainable Communities Program, administered by the Strategic Growth Council. Existing law specifies the objectives for the program and identifies categories of projects eligible for funding under this program.

This bill would require the council, in implementing these provisions, to give special consideration to awarding funds to eligible projects that, in addition to existing objectives and goals, would also result in reduced energy use by a water supplier, an end user of water, or both.

(2)The Integrated Regional Water Management Planning Act authorizes a regional water management group to prepare an integrated regional water management plan, in accordance with certain procedures, for the implementation or operation of specified qualified projects or programs pertaining to water supply, water quality, or related matters. The act defines regional projects or programs as projects or programs identified in an integrated regional water management plan that accomplish specified water-related goals, including an increase in water supplies through the use of certain means.

This bill would specifically include projects or programs that reduce energy used to acquire, transport, treat, or distribute water as a regional project or program.

(3)Existing law, the Water Quality, Supply, and Infrastructure Improvement Act of 2014, approved by the voters as Proposition 1 at the November 4, 2014, statewide general election, authorizes the issuance of general obligation bonds in the amount of $7,545,000,000 to finance a water quality, supply, and infrastructure improvement program. The bond act provides that the sum of $810,000,000 is to be available, upon appropriation by the Legislature, for expenditures on, and competitive grants and loans to, projects that are included in and implemented in, an adopted integrated regional water management plan and respond to climate change and contribute to regional water security. The bond act authorizes the use of $100,000,000 of those funds for direct expenditures, and for grants and loans, for certain water conservation and water-use efficiency plans, projects, and programs.

This bill, in implementing the direct expenditures, grants, and loans for these water conservation and water-use efficiency plans, projects, and programs, would require special consideration be given to expenditures, grants, and loans that would result in reduced energy use by the water supplier, end user of the water, or both.

(4)The bill would make legislative findings and declarations, and a statement of legislative intent, with regard to the nexus between water and energy and water and reduction of greenhouse gas emissions.

(5)The bill would also state the intent of the Legislature to enact legislation to require the Energy Resources Conservation and Development Commission to update and further refine its 2007 study of water-related energy use in California, without imposing any new emissions regulations on affected entities.

Date of Hearing: August 26, 2015

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Jimmy Gomez, Chair

SBPCA Bill Id:SB 471

Author:(Pavley) – As Amended Ver:August 17, 2015

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill explicitly allows reductions of greenhouse gas (GHG) emissions associated with the water sector, including water use, supply and treatment, to be eligible for funding from AB 32 cap and trade revenues. Specifically, this bill:

1. Requires the California Energy Commission (CEC), in cooperation with the State Water Resources Control Board (SWRCB), Air Resources Board (ARB), the Public Utilities Commission (PUC), and the Department of Water Resources (DWR), to study water-related energy use in California, as specified.

2. Requires the State Water Resources Control Board (SWRCB), in cooperation with CEC, ARB, PUC, and DWR, to develop a grant and loan program, upon appropriation of Greenhouse Gas Reduction Funds (GGRF), to fund projects that result in water-related GHG emission reductions. Authorizes SWRCB to adopt guidelines and regulations necessary to implement the bill.

3. Requires that any public funds made available for the program to private water companies regulated by the PUC be used for the benefit of ratepayers or the public.
   
   

FISCAL EFFECT:

1. Annual cost pressures of approximately $10 million to fund a grant and loan program at SWRCB, including $500,000 for administration (GGRF).

2. Increased one-time costs of $315,000 and ongoing costs of $175,000 for ARB to provide assistance to CEC and develop methodology to quantify GHG reductions (GGRF).

3. Unknown increased ongoing costs for DWR to provide assistance to CEC, likely in the $50,000 to $250,000 range (GGRF).

4. Increased ongoing annual costs of $100,000 for the PUC to provide assistance to the CEC.

COMMENTS:

1. Rationale. Existing law allows GGRF to be used for the reduction of GHG emissions associated with water use and supply. Although, it is possible that water treatment would also be considered an eligible use as it is an integral part of urban water use and often requires significant amounts of electricity, this bill ensures water treatment projects are eligible for GGRF.

2. Background. Under the California Global Warming Solutions Act of 2006 (AB 32, Chapter 488, Statutes of 2006) the Air Resources Board (ARB) is required to determine the 1990 statewide greenhouse gas (GHG) emissions level, to approve a statewide GHG emissions limit equivalent to that level that will be achieved by 2020, and to adopt GHG emissions reductions measures by regulation. ARB is authorized to include the use of market-based mechanisms to comply with the regulations. All monies, except for fines and penalties, collected pursuant to a market-based mechanism are deposited in the Greenhouse Gas Reduction Fund (GGRF).

Existing law requires the GGRF to be used only to facilitate the achievement of reductions of GHG emissions and lists a non-exclusive list of eligible project purposes including funding to reduce GHG emissions associated with water use and supply.

3. Funding for water and GHG emissions. Emergency drought relief legislation, SB 103 (Budget Committee, Chapter 2, Statutes of 2014) appropriated $10 million to the California Department of Food and Agriculture (CDFA) for water and energy efficiency projects in the agricultural sector, and $30 million to DWR to implement a grant program to support local water-use efficiency projects and energy efficiency projects at State Water Project facilities. If this bill is enacted, there will be three entities competing for GGRF water project funds.
   
   The 2014-15 Budget allocates $832 million in GGRF revenues to a variety of transportation, energy, and resources programs aimed at reducing GHG emissions. Various agencies are in the process of implementing this funding. The budget agreement specifies how the state will allocate most cap-and-trade auction revenues in 2015-16 and beyond. For all future revenues, the legislation appropriates 25% for the state’s high-speed rail project, 20% for affordable housing and sustainable communities grants, 10% to intercity capital rail projects, and 5% for low-carbon transit operations. The remaining 40% is available for annual appropriation by the Legislature, but has not yet been appropriated for the 2015-16 Fiscal Year.
   
   Of that 40% available for annual appropriation, the Governor’s proposed 2015-16 cap-and-trade expenditures would appropriate $60 million to DWR and CDFA for water and energy efficiency projects, $30 million to CEC and DWR for rebates to replace inefficient appliances, and $30 million to CEC and DWR for the Water and Energy Technology Program.

Analysis Prepared by: Jennifer Galehouse / APPR. / (916) 319-2081

Date of Hearing: July 13, 2015

ASSEMBLY COMMITTEE ON NATURAL RESOURCES

Das Williams, Chair

SBPCA Bill Id:SB 471

Author:(Pavley) – As Amended Ver:June 2, 2015

SENATE VOTE: Not relevant

SUBJECT: Water, energy, and reduction of greenhouse gas emissions: planning.

SUMMARY: This bill specifies that reductions of greenhouse gas (GHG) emissions associated with the water sector, including water use, supply, and treatment, are eligible investments from the Greenhouse Gas Reduction Fund (GGRF). Requires the California Energy Commission (CEC) to study water-related energy use in California. Requires the State Water Resources Control Board (SWRCB) to develop a grant and loan program to fund projects that result in water-related GHG emission reductions.

EXISTING LAW, under the California Global Warming Solutions Act of 2006 (AB 32):

1. Requires the California Air Resources Board (ARB) to adopt GHG emissions reduction measures to achieve a reduction in statewide GHG emsisions to the 1990 level.
   
   

2. Requires ARB to prepare and approve a Scoping Plan, on or before January 1, 2009 and once every five years thereafter, for achieving the maximum technologically feasible and cost-effective reductions in GHG emissions from sources of emissions by 2020.

3. Establishes the GGRF in the State Treasury; requires all funds, except for fines and penalties, collected pursuant to a market-based mechanism be deposited in the GGRF; and, requires the Department of Finance, in consultation with ARB and any other relevant state agency, to develop a three-year investment plan for the GGRF.

4. Requires that the GGRF be used to facilitate GHG emissions reductions in this state consistent with AB 32. Requires that annual budget appropriations from the GGRF be consistent with the investment plan.
   
   

THIS BILL:

1. States legislative intent relating to the nexus between water, energy, and GHG emission reductions.

2. Specifies that reductions of GHG emissions associated with the water sector, including water use, supply, and treatment, are eligible investments from the GGRF.
   
   

3. Requires CEC, in cooperation with the State Water Resources Control Board (SWRCB), ARB, the Public Utilities Commission (PUC), and the Department of Water Resources (DWR), to conduct a study of water-related energy use in the state. In conducting the study, requires CEC to:
   
   

   1. Hold a minimum of two public workshops to allow input from stakeholders;
      
      

   2. Include any source-specific data; and,
      
      

   3. Identify existing data gaps.
      
      

4. Requires SWRCB, in cooperation with CEC, ARB, PUC, and DWR, to establish a grant and loan program for water projects that result in the net reduction of water-related GHG emissions.
   
   

5. Establishes the following categories for grant funding:
   
   

   1. Precision irrigation;
      
      

   2. Infrastructure improvements that will help deliver on-demand water for precision application;
      
      

   3. Local water solutions that reduce net energy use;
      
      

   4. Clean energy generation in the water sector;
      
      

   5. Leak detection;
      
      

   6. Water appliance efficiency; and,
      
      

   7. Water monitoring software.
      
      

6. Requires that any public funds made available for the program to private water companies regulated by the PUC be used for the benefit of ratepayers or the public.
   
   

7. Authorizes SWRCB to adopt guidelines and regulations necessary to implement the bill.

FISCAL EFFECT: Unknown

COMMENTS:

1. Author's statement.

Some of [the state's] water-energy related climate pollution is already covered by the state's cap-and-trade program by the electricity generation sector. However, water suppliers, treaters, distributors, and end users currently lack the information and opportunity to do their part in advancing our climate and water conservation goals. As a result, a variety of projects that might reduce climate pollution from the water system do not currently qualify for project funding from the GGRF.

SB 471 will establish a program to allow a variety of water projects to qualify for funding from the GGRF, provided these projects reduce emissions in furtherance of our state climate goals.

2. Water and energy use. According to the CEC, water-related energy use in California consumes approximately 20% of the state’s electricity and 30% of the state’s non-power plant natural gas (natural gas not used to produce electricity). The water sector uses electricity to pump, treat, transport, deliver, and heat water. The CEC also found that the most energy-intensive uses of water in California are associated with end uses by the customer (e.g., heating, processing, and pressurizing water), and 75% of the electricity and nearly all of the natural gas use related to water in California is associated with water heating. Additionally, expected increases in groundwater pumping, water treatment, and water recycling, due to drought conditions in the state, mean the energy intensity of water will likely increase.

3. Executive Order. Executive Order B-29-15 (Brown), issued April 1, 2015, directed state agencies to perform various actions regarding saving water to respond to severe drought conditions in the state, including directing the CEC, jointly with DWR, to implement a Water Energy Technology program to deploy innovative water management technologies that achieve water and energy savings and GHG emissions reductions. The Executive Order also directed the CEC, jointly with DWR, to implement a limited statewide appliance rebate program for inefficient appliances.

4. Funding for water and GHG emissions. Emergency drought relief legislation, SB 103 (Budget Committee, Chapter 2, Statutes of 2014) appropriated $10 million to the California Department of Food and Agriculture (CDFA) for water and energy efficiency projects in the agricultural sector, and $30 million to DWR to implement a grant program to support local water-use efficiency projects and energy efficiency projects at State Water Project facilities.
   
   The 2014-15 Budget allocates $832 million in GGRF revenues to a variety of transportation, energy, and resources programs aimed at reducing GHG emissions. Various agencies are in the process of implementing this funding. The budget agreement specifies how the state will allocate most cap-and-trade auction revenues in 2015-16 and beyond. For all future revenues, the legislation appropriates 25% for the state’s high-speed rail project, 20% for affordable housing and sustainable communities grants, 10% to intercity capital rail projects, and 5% for low-carbon transit operations. The remaining 40% is available for annual appropriation by the Legislature.
   
   Of that 40% available for annual appropriation, the Governor’s proposed 2015-16 cap-and-trade expenditures would appropriate $60 million to DWR and CDFA for water and energy efficiency projects, $30 million to CEC and DWR for rebates to replace inefficient appliances, and $30 million to CEC and DWR for the Water and Energy Technology Program, as described in the Executive Order.

5. Drought funding. In response to California's ongoing drought, AB 91 (Budget and Fiscal Review), Chapter 1, Statutes of 2015 allocated just over $1 billion for drought-related activities. Among other things, this bill:

   1. Accelerates a $131.7 million appropriation to SWRCB to fund water recycling projects, including feasibility studies, demonstration projects, and larger scale water recycling projects.
      
      
      

   2. Accelerates a $135.5 million appropriation to SWRCB to improve access to drinking water for disadvantaged communities and help small communities pay for wastewater treatment.

   3. Accelerates a $20 million appropriation from the GGRF to DWR for state and local water use efficiency programs that reduce GHG emissions.

   4. Appropriates $10 million from the GGRF to CDFA for agricultural water efficiency projects that reduce GHG emissions.

6. Suggested amendments. The author's office intends for the grant and loan program to be funded by the GGRF; however, the bill does not specify a funding source or appropriate any funds. The committee may wish to amend the bill to specify that the program shall be funded upon appropriation by the Legislature from the GGRF.
   
   For clarity, the committee may wish to amend the bill to clarify that grants and loans are available for in-state projects.
   
   
   

REGISTERED SUPPORT / OPPOSITION:

Support

California Association of Sanitation Agencies

California Coastkeeper Alliance

California League of Conservation Voters

California Municipal Utilities Association

City of Agoura Hills, Mayor Weber

City of Pasadena’s Water and Power Department

Clean Water Action

Coastal Environment Rights Foundation

East Bay Municipal Utility District

Humboldt Baykeeper

Inland Empire Waterkeeper

Klamath Riverkeeper

LA River Revitalization Corporation

Las Virgenes Municipal Water District

Los Angeles Waterkeeper

Mono Lake Committee

Monterey Coastkeeper

Orange County Coastkeeper

Russian Riverkeeper

San Diego Coastkeeper

San Francisco Baykeeper

San Luis Obispo Coastkeeper

Santa Barbara Channelkeeper

Sonoma County Water Agency

Southern California Edison

The Climate Registry

The Energy Coalition

The River Project

TreePeople

Union of Concerned Scientists

USGBC

U.S. Green Building Council

Union of Concerned Scientists

Ventura Coastkeeper

Opposition

None on file

Analysis Prepared by: Elizabeth MacMillan / NAT. RES. / (916) 319-2092

 THIRD READING  

Bill No: SB 471

Author: Pavley (D)

Amended: 6/2/15

Vote: 21

SENATE ENVIRONMENTAL QUALITY COMMITTEE: 7-0, 4/29/15

AYES: Wieckowski, Gaines, Bates, Hill, Jackson, Leno, Pavley

SENATE APPROPRIATIONS COMMITTEE: 6-1, 5/28/15

AYES: Lara, Bates, Beall, Hill, Leyva, Mendoza

NOES: Nielsen

SUBJECT: Greenhouse Gas Reduction Fund: water sector emissions

SOURCE: Author

DIGEST: This bill specifies that reductions of greenhouse gas (GHG) emissions associated with the water sector, including water use, supply, and treatment, are eligible investments from the Greenhouse Gas Reduction Fund (GGRF).

ANALYSIS:

Existing law:

1. Requires, under the California Global Warming Solutions Act of 2006 (also known as AB 32) (Health and Safety Code §38500 et seq.), the California Air Resources Board (ARB) to determine the 1990 statewide GHG emissions level and approve a statewide GHG emissions limit that is equivalent to that level, to be achieved by 2020. AB 32 authorizes ARB to adopt a regulation that establishes a market-based mechanism with declining annual aggregate emission limits for sources that emit GHGs.
   
   

2. Establishes the GGRF in the State Treasury, requires all moneys, except for fines and penalties, collected pursuant to a market-based mechanism be deposited in the fund, and requires the Department of Finance (DOF), in consultation with the state board and any other relevant state agency, to develop, as specified, a three-year investment plan for the moneys deposited in the GGRF. (Government Code §16428.8)

3. Requires moneys from the GGRF be used to facilitate the achievement of reductions of GHG emissions in this state consistent with AB 32, and authorizes the use of GGRF moneys for, among other things, funding to reduce GHG emissions associated with water use and supply, land and natural resource conservation and management, forestry, and sustainable agriculture. (HSC §39712)
   
   
   

This bill:

1. Includes intent language pertaining to the nexus between water, energy, and GHG emissions reductions.

2. Specifies that reductions of GHG emissions associated with the water sector, including water use, supply, and treatment, are eligible investments from the GGRF.

Background

Water and energy use. According to the California Energy Resources Conservation and Development Commission (CEC), water-related energy use in California consumes approximately 20% of the state’s electricity, and 30% of the state’s non-power plant natural gas (natural gas not used to produce electricity). The water sector uses electricity to pump, treat, transport, deliver, and heat water. The CEC also found that the most energy-intensive uses of water in California are associated with end uses by the customer (e.g. heating, processing, and pressurizing water). To this point, the CEC states that 75% of the electricity and nearly all of the natural gas use related to water in California is associated with the end use of water, primarily for water heating. Additionally, expected increases in groundwater pumping, water treatment, and water recycling, due to drought conditions in the state, mean the energy intensity of water will likely increase.

Cap-and-trade auction revenue. ARB has conducted eleven cap-and-trade auctions. The first 10 have generated almost $1.6 billion in proceeds to the state.

Several bills in 2012 provided legislative direction for the expenditure of auction proceeds including SB 535 (de León, Chapter 830, Statutes of 2012) and AB 1532 (J. Pérez, Chapter 807, Statutes of 2012).

• SB 535 requires that 25% of auction revenue be used to benefit disadvantaged communities and requires that 10% of auction revenue be invested in disadvantaged communities.

• AB 1532 directs DOF develop and periodically update a three-year investment plan that identifies feasible and cost-effective GHG emission reduction investments to be funded with cap-and-trade auction revenues. AB 1532 specifies that the reduction of GHG emissions associated with water use and supply are eligible investments of GGRF.

Legal consideration of cap-and-trade auction revenues. The 2012-13 budget analysis of cap-and-trade auction revenue by the Legislative Analyst’s Office noted that, based on an opinion from the Office of Legislative Counsel, the auction revenues should be considered mitigation fee revenues, and their use requires that a clear nexus exist between an activity for which a mitigation fee is used and the adverse effects related to the activity on which that fee is levied. Therefore, according to the report, in order for their use to be valid as mitigation fees, revenues from the cap-and-trade auction must be used to mitigate GHG emissions or the harms caused by GHG emissions.

In 2012, the California Chamber of Commerce and Morning Star Packing Company filed a lawsuit against the ARB claiming that cap-and-trade auction revenues constitute illegal tax revenue. In November 2013, the superior court ruling declined to hold the auction a tax, concluding that it’s more akin to a regulatory fee. The plaintiffs filed an appeal with the 3rd District Court of Appeal in Sacramento in February of last year.

Executive Order. Executive Order B-29-15, issued April 1, 2015, directed state agencies to perform various actions regarding saving water to respond to severe drought conditions in the state, including directing the CEC, jointly with the Department of Water Resources (DWR), to implement a Water Energy Technology program to deploy innovative water management technologies that achieve water and energy savings, and GHG emissions reductions. The Executive Order also directed the CEC, jointly with DWR, to implement a limited statewide appliance rebate program for inefficient appliances.

Budget allocations. Emergency drought relief legislation, SB 103 (Budget Committee, Chapter 2, Statutes of 2014) appropriated $10 million to the California Department of Food and Agriculture (CDFA) for water and energy efficiency projects in the agricultural sector, and $30 million to DWR to implement a grant program to support local water-use efficiency projects and energy efficiency projects at State Water Project facilities.

The 2014-15 Budget allocates $832 million in GGRF revenues to a variety of transportation, energy, and resources programs aimed at reducing GHG emissions. Various agencies are in the process of implementing this funding. The budget agreement specifies how the state will allocate most cap-and-trade auction revenues in 2015-16 and beyond. For all future revenues, the legislation appropriates 25% for the state’s high-speed rail project, 20% for affordable housing and sustainable communities grants, 10% to intercity capital rail projects, and 5% for low-carbon transit operations. The remaining 40% is available for annual appropriation by the Legislature.

Of that 40% available for annual appropriation, the Governor’s proposed 2015-16 cap-and-trade expenditures appropriates $60 million to DWR and CDFA for water and energy efficiency projects, $30 million to the CEC and DWR for rebates to replace inefficient appliances, and $30 million to the CEC and DWR for the Water and Energy Technology Program, as described in the Executive Order.

Comments

Purpose of bill. According to the author, “SB 471 will ensure that project types that reduce emissions in furtherance of our state climate goals qualify for funding from the GGRF. Project types could include, but are not limited to precision agriculture, local water solutions that reduce energy-intensive water imports, clean energy generation at wastewater treatment facilities, leak detection, and water appliance efficiency.”

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

According to the Senate Appropriations Committee:

• Unknown possible cost pressures, likely in the hundreds of thousands to millions of dollars, to the GGRF for the addition of water treatment as an eligible use.

SUPPORT: (Verified 5/28/15)

California Association of Sanitation Agencies

California League of Conservation Voters

Clean Water Action

Coastal Environment Rights Foundation

Environmental Entrepreneurs

LA River Revitalization Corporation

Las Virgenes Municipal Water District

Mono Lake Committee

Nexus eWater

Sonoma County Water Agency

Southern California Edison

The Climate Registry

The Energy Coalition

The River Project

TreePeople

Union of Concerned Scientists

US Green Buildings Council

Water and Power Department, City of Pasadena

OPPOSITION: (Verified 5/28/15)

None received

Prepared by: Rebecca Newhouse / E.Q. / (916) 651-4108

6/2/15 20:04:42

**** END ****

SENATE COMMITTEE ON APPROPRIATIONS

Senator Ricardo Lara, Chair

2015 - 2016 Regular Session

SB 471 (Pavley) - Water, energy, and reduction of greenhouse gas emissions: planning.

SUSPENSE FILE. AS AMENDED.

Bill Summary:

SB 471 would require the California Air Resources Board (ARB) to develop an emissions inventory of greenhouse gas (GHG) emissions from the water system in the state using the best available data.

Fiscal Impact (as approved on May 28, 2015):

• Unknown possible cost pressures, likely in the hundreds of thousands to millions of dollars, to the Greenhouse Gas Reduction Fund for the addition of water treatment as an eligible use.

Background:

Under the California Global Warming Solutions Act of 2006 (referred to as AB 32, HSC §38500 et seq.), the California Air Resources Board (ARB) is required to determine the 1990 statewide greenhouse gas (GHG) emissions level, to approve a statewide GHG emissions limit equivalent to that level that will be achieved by 2020, and to adopt GHG emissions reductions measures by regulation. ARB is authorized to include the use of market-based mechanisms to comply with the regulations. All monies, except for fines and penalties, collected pursuant to a market-based mechanism are deposited in the Greenhouse Gas Reduction Fund (GGRF) (Government Code §16428.8).

Existing law requires that the GGRF only be used to facilitate the achievement of reductions of GHG emissions consistent with AB 32 (HSC §39710 et seq.). Section 39712 lists a non-exclusive list of eligible project purposes including funding to reduce GHG emissions associated with water use and supply.

Proposed Law:

This bill would explicitly make investments that reduce GHG emissions from water treatment eligible for funding from the GGRF.

This bill would require the ARB, in cooperation with the California Energy Commission (CEC), California Public Utilities Commission (CPUC), State Water Resources Control Board (board), and the Department of Water Resources (DWR), to develop an emissions inventory of GHG emissions from the water system in the state using the vest available data. The bill would establish that it is the intent of the Legislature for this information to inform the next scoping plan update.

Staff Comments:

To conduct the GHG emissions inventory of the state water system on a timeframe that would allow the information to inform the next scoping plan update, the ARB estimates that it would need an additional staff for its emission inventory team at an annual cost of $175,000 from the Cost of Implementation Account.

Staff notes that the emissions inventory is to be of the “state water system,” but this term is not defined and could have various interpretations. According to the author’s staff, this term is meant to be fairly inclusive of the various water systems in the state from the state water project down to the individual household and water heaters. Staff notes that this could involve a significant amount of data and detail to obtain. The costs to the ARB assume the analysis done on a regional level that would include emissions from water distribution, water treatment, and hydropower generation.

This bill would require the CEC, CPUC, board, and DWR to assist the ARB in creating the emissions inventory. For the most part, these costs should be minor and absorbable. However, one of the agencies, most likely DWR or the board, will likely have a greater role in identifying water suppliers and water retailers whom will need to provide information to inform ARB’s inventory. Depending on how much ARB will rely on the coordinating agencies to collect the information, costs for a coordinating agency could be up to $50,000 annually.

This bill would explicitly allow GGRF funds to be used to reduce GHG emissions associated with water treatment. Existing law already allows GGRF to be used for reducing GHG emissions associated with water use and supply. It is conceivable that treatment would have already been considered an eligible use as it is an integral component of urban water use and can require significant amounts of electricity. This bill would remove any doubt on the ability to use GGRF for water treatment projects. To the extent that this would be a new use, this bill would add cost pressures to the GGRF.

Committee amendments (as adopted on May 28, 2015): Amend to delete the requirement for the development of an GHG emissions inventory the water system in the state and associated findings language.

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SENATE COMMITTEE ON APPROPRIATIONS

Senator Ricardo Lara, Chair

2015 - 2016 Regular Session

SB 471 (Pavley) - Water, energy, and reduction of greenhouse gas emissions: planning.

This bill meets the criteria for referral to the Suspense File.

Bill Summary:

SB 471 would require the California Air Resources Board (ARB) to develop an emissions inventory of greenhouse gas (GHG) emissions from the water system in the state using the best available data.

Fiscal Impact:

• Ongoing annual costs of at least $175,000 to the Cost of Implementation Account (special) to develop the emissions inventory of the water system in the state on a regional level.

• Ongoing costs of up to $50,000 from the General Fund for one of the coordinating agencies to facilitate information gathering from retail and wholesale water sellers for the emissions inventory.

• Unknown possible cost pressures, likely in the hundreds of thousands to millions of dollars, to the Greenhouse Gas Reduction Fund for the addition of water treatment as an eligible use.

Background:

Under the California Global Warming Solutions Act of 2006 (referred to as AB 32, HSC §38500 et seq.), the California Air Resources Board (ARB) is required to determine the 1990 statewide greenhouse gas (GHG) emissions level, to approve a statewide GHG emissions limit equivalent to that level that will be achieved by 2020, and to adopt GHG emissions reductions measures by regulation. ARB is authorized to include the use of market-based mechanisms to comply with the regulations. All monies, except for fines and penalties, collected pursuant to a market-based mechanism are deposited in the Greenhouse Gas Reduction Fund (GGRF) (Government Code §16428.8).

Existing law requires that the GGRF only be used to facilitate the achievement of reductions of GHG emissions consistent with AB 32 (HSC §39710 et seq.). Section 39712 lists a non-exclusive list of eligible project purposes including funding to reduce GHG emissions associated with water use and supply.

Proposed Law:

This bill would explicitly make investments that reduce GHG emissions from water treatment eligible for funding from the GGRF.

This bill would require the ARB, in cooperation with the California Energy Commission (CEC), California Public Utilities Commission (CPUC), State Water Resources Control Board (board), and the Department of Water Resources (DWR), to develop an emissions inventory of GHG emissions from the water system in the state using the vest available data. The bill would establish that it is the intent of the Legislature for this information to inform the next scoping plan update.

Staff Comments:

To conduct the GHG emissions inventory of the state water system on a timeframe that would allow the information to inform the next scoping plan update, the ARB estimates that it would need an additional staff for its emission inventory team at an annual cost of $175,000 from the Cost of Implementation Account.

Staff notes that the emissions inventory is to be of the “state water system,” but this term is not defined and could have various interpretations. According to the author’s staff, this term is meant to be fairly inclusive of the various water systems in the state from the state water project down to the individual household and water heaters. Staff notes that this could involve a significant amount of data and detail to obtain. The costs to the ARB assume the analysis done on a regional level that would include emissions from water distribution, water treatment, and hydropower generation.

This bill would require the CEC, CPUC, board, and DWR to assist the ARB in creating the emissions inventory. For the most part, these costs should be minor and absorbable. However, one of the agencies, most likely DWR or the board, will likely have a greater role in identifying water suppliers and water retailers whom will need to provide information to inform ARB’s inventory. Depending on how much ARB will rely on the coordinating agencies to collect the information, costs for a coordinating agency could be up to $50,000 annually.

This bill would explicitly allow GGRF funds to be used to reduce GHG emissions associated with water treatment. Existing law already allows GGRF to be used for reducing GHG emissions associated with water use and supply. It is conceivable that treatment would have already been considered an eligible use as it is an integral component of urban water use and can require significant amounts of electricity. This bill would remove any doubt on the ability to use GGRF for water treatment projects. To the extent that this would be a new use, this bill would add cost pressures to the GGRF.

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SENATE COMMITTEE ON ENVIRONMENTAL QUALITY

Senator Bob Wieckowski, Chair

2015 - 2016 Regular

Bill No: SB 471 Hearing Date: 4/29/15

Subject: Water, energy, and reduction of greenhouse gas emissions: planning

ANALYSIS:

Existing law:

1. Existing law under the California Global Warming Solutions Act of 2006 (also known as AB 32) (Health and Safety Code §38500 et seq.):

1. Requires the California Air Resources Board (ARB) to determine the 1990 statewide greenhouse gas (GHG) emissions level and approve a statewide GHG emissions limit that is equivalent to that level, to be achieved by 2020.

2. Requires ARB to adopt, before January 1, 2008, regulations to require the reporting and verification of statewide greenhouse gas emissions.

3. Requires ARB to adopt GHG emissions reductions measures by regulation, and sets certain requirements in adopting the regulations.

4. Authorizes ARB to adopt a regulation that establishes a system of market-based declining annual aggregate emission limits for sources or categories of sources that emit GHGs, applicable from January 1, 2012, to December 31, 2020, inclusive.
   
   

1. Establishes the Greenhouse Gas Reduction Fund (GGRF) in the State Treasury, requires all moneys, except for fines and penalties, collected pursuant to a market-based mechanism be deposited in the fund, and requires the Department of Finance, in consultation with the state board and any other relevant state agency, to develop, as specified, a three-year investment plan for the moneys deposited in the GGRF. (Government Code §16428.8)

3. Requires moneys from the GGRF be used to facilitate the achievement of

reductions of GHG emissions in this state consistent with AB 32, and authorizes the use of GGRF monies for, among other things, funding to reduce greenhouse gas emissions associated with water use and supply, land and natural resource conservation and management, forestry, and sustainable agriculture. (HSC §39712)

This bill:

1. Includes intent language pertaining to the nexus between water and energy and GHG emissions reductions.

2. Requires ARB, in cooperation with the State Energy Resources Conservation and Development Commission (CEC), the state Water Resources Control Board, and the Department of Water Resources, to develop an emissions inventory of GHG emissions from the water system in the state using the best available data.

3. Specifies that water recycling, wastewater treatment, water end-use efficiency, water technology improvements, best management practices, and other programs that reduce water system GHG emissions, are eligible for funding from the GGRF.

Background

1. Water and Energy Use.

According to an April 2015 report from the Union of Concerned Scientists titled, Clean Energy Opportunities in California’s Water Sector:

“California’s water sector consumes nearly 20 percent of the state’s electricity,

and its needs are growing. The water sector uses electricity to pump, treat, transport, deliver, and heat water (CEC 2006). And expected increases in groundwater pumping, water treatment, and water recycling mean the energy intensity of water will grow. While there is growing recognition that increased water efficiency is one of the fastest and cheapest ways to conserve electricity, less attention has been paid to the sources of electricity powering the water sector.”

Additionally, according to the report, “Water and wastewater utilities access electricity by purchasing it from an electric utility or the wholesale market, by signing a contract with an independent generator, or by generating it themselves. Although the electricity purchased from electric utilities is governed by California’s Renewables Portfolio Standard (RPS) and must become cleaner over time, the electricity that water and wastewater utilities directly purchase or generate is not typically addressed by California’s climate and renewable energy policies.”

State law requires electric utilities to disclose the sources of the electricity they sell; this requirement does not extend to water utilities that are not retail electricity providers. And although some water and wastewater utilities independently report the sources of their electricity, the information is not compiled in a standardized format or updated on a regular schedule across the water sector. Even in cases in which water utilities are required to submit power source disclosure forms, these forms combine electricity that they consume with electricity that is sold to other electricity providers. The report finds that it is difficult to get a clear picture of the amount and type of electricity California’s water and wastewater utilities rely on and that this information gap makes it difficult to understand how their electricity choices impact global warming emissions and the state’s efforts to decarbonize the electricity sector.

The report proposes that improved information collection from water and wastewater utilities regarding their electricity use and sourcing practices could help illuminate the water sector’s role in generating clean electricity and providing grid services that will help bring more clean energy onto the grid.

2. Use of Cap and Trade Auction Revenue.

ARB has conducted ten cap-and-trade auctions, generating almost $1.6 billion in proceeds to the state.

Several bills in 2012, and one in 2014, provide legislative direction for the expenditure of auction proceeds including SB 535 (De León), Chapter 830, Statutes of 2012, AB 1532 (J. Pérez), Chapter 807, Statutes of 2012, SB 1018 (Budget Committee), Chapter 39, Statutes 2012, and SB 862 (Budget Committee), Chapter 36, Statutes of 2014.

SB 535 (De León), Chapter 830, Statutes of 2012, requires that 25% of auction revenue be used to benefit disadvantaged communities and requires that 10% of auction revenue be invested in disadvantaged communities.

AB 1532 (J. Pérez), Chapter 807, Statutes of 2012, directs the Department of Finance to develop and periodically update a three-year investment plan that identifies feasible and cost-effective GHG emission reduction investments to be funded with cap-and-trade auction revenues. AB 1532 requires monies from the fund facilitate the achievement of GHG emissions reductions.

SB 1018 (Budget Committee), Chapter 39, Statutes of 2012, created the GGRF, into which all auction revenue is to be deposited. The legislation requires that before departments can spend moneys from the GGRF, they must prepare a record specifying: (1) how the expenditures will be used, (2) how the expenditures will further the purposes of AB 32 (Núñez, Pavley), Chapter 488, Statutes of 2006, (3) how the expenditures will achieve GHG emission reductions, (4) how the department considered other non-GHG-related objectives, and (5) how the department will document the results of the expenditures.

SB 862 (Budget Committee), Chapter 36, Statutes of 2014, requires the ARB to develop guidelines on maximizing benefits for disadvantaged communities by agencies administering GGRF funds, and guidance for administering agencies on GHG emission reduction reporting and quantification methods.

Legal consideration of cap-and-trade auction revenues: The 2012-13 Budget analysis of cap-and-trade auction revenue by the Legislative Analyst’s Office noted that, based on an opinion from the Office of Legislative Counsel, the auction revenues should be considered mitigation fee revenues, and their use requires that a clear nexus exist between an activity for which a mitigation fee is used and the adverse effects related to the activity on which that fee is levied. Therefore, in order for their use to be valid as mitigation fees, revenues from the cap-and-trade auction must be used to mitigate GHG emissions or the harms caused by GHG emissions.

In 2012, the California Chamber of Commerce filed a lawsuit against the ARB claiming that cap-and-trade auction revenues constitute illegal tax revenue. In November 2013, the superior court ruling declined to hold the auction a tax, concluding that it is more akin to a regulatory fee.

Budget allocations: Emergency drought relief legislation, SB 103 (Budget Committee), Chapter 2, Statutes of 2014, appropriated $10 million to the California Department of Food and Agriculture for water and energy efficiency projects in the agricultural sector, and $30 million to the Department of Water Resources to implement a grant program to support local water-use efficiency projects and energy efficiency projects at State Water Project facilities.

The 2014-15 Budget allocates $832 million in GGRF revenues to a variety of transportation, energy, and resources programs aimed at reducing GHG emissions. Various agencies are in the process of implementing this funding. The budget agreement specifies how the state will allocate most cap-and-trade auction revenues in 2015-16 and beyond. For all future revenues, the legislation appropriates 25% for the state’s high-speed rail project, 20% for affordable housing and sustainable communities grants, 10% to intercity capital rail projects, and 5% for low-carbon transit operations. The remaining 40% is available for annual appropriation by the Legislature.

The Governor’s proposed 2015-16 cap-and-trade expenditures are largely the same as the 2014-15 plan, albeit with larger amounts proposed allocations for programs with continuous appropriations.

Comments

1. Purpose of Bill.

According to the author, “SB 471 focuses on quantifying the Water-Energy-Climate Nexus — the connection between the greenhouse gas emissions generated from the energy required by our water system, to simultaneously advance solutions to climate change and drought.

“While some water-energy related climate pollution is already covered in the state’s cap-and-trade program by the electricity generation sector, water suppliers, treaters, distributors and end users currently lack the information and opportunity to do their part in advancing our climate and water conservation goals.

“As a result, a variety of projects that might reduce climate pollution from the water system do not currently qualify for project funding from the Greenhouse Gas Reduction Fund (GGRF).

“SB 471 will ensure that project types that reduce emissions in furtherance of our state climate goals qualify for funding from the GGRF. Project types could include, but are not limited to precision agriculture, local water solutions that reduce energy-intensive water imports, clean energy generation at wastewater treatment facilities, leak detection, and water appliance efficiency.”

2. Recycling Water and GHGs.

The State Water Resources Control Board (SWRCB) has a goal of increasing the use of recycled water by at least 1 million acre-feet per year by 2020 and by at least 2 million acre-feet per year by 2030 over 2002 levels.

Especially in light of the state’s severe drought conditions, water recycling will undoubtedly become an increasingly important part of California’s future water supply.

However, recycling water often requires more energy than treating water taken from surface or underground sources. For examples, the WateReuse

Foundation estimates that it would require an additional 1,215 GWh per year to

recycle about 1 million acre-feet of water to potable standards. And to reach the SWRCB’s 2030 goal, the water sector’s energy requirements would grow by around 2,430 GWh per year.

SB 471 authorizes water recycling, as well as wastewater treatment, water end-use efficiency, water technology improvements, and best management practices, and other programs that reduce water system greenhouse gas emissions, as eligible for funding from cap-and-trade auction revenue.

The bill is drafted in a way that presupposes that water recycling reduces GHG emissions; however, there is data to show that it may increase emissions in some cases as compared to treating surface or groundwater to potable standards.

Additionally, the bill specifies some projects as eligible for funding that may already be captured under existing law.

Instead of specifying various projects that may not reduce GHG emissions, and specifying other projects that are already captured under current statute, the committee may wish to amend SB 471 to strike subdivision (b) from the bill, and, instead amend existing law (Health and Safety Code §39712) to broadly authorize the reduction of GHG emissions from the water sector, including, but not limited to, supply, use, and treatment, as eligible investments from the fund.

SOURCE:

Author

SUPPORT:

California Association of Sanitation Agencies

California League of Conservation Voters

Clean Water Action

Coastal Environment Rights Foundation

Environmental Entrepreneurs

LA River Revitalization Corporation

Las Virgenes Municipal Water District

Mono Lake Committee

Nexus eWater

Sonoma County Water Agency

The Climate Registry

The Energy Coalition

The River Project

TreePeople

Union of Concerned Scientists

US Green Buildings Council

Water and Power Department, City of Pasadena

OPPOSITION:

None on file

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