BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 44
                                                                  Page  1


          ASSEMBLY THIRD READING
          AB 44 (Blakelslee)
          As Amended  June 1, 2009
          Majority vote 

           UTILITIES AND COMMERCE         14-0                  
          APPROPRIATIONS      17-0                            
           
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          |Ayes:|Fuentes, Duvall, Tom      |Ayes:|De Leon, Nielsen,         |
          |     |Berryhill, Blakeslee,     |     |Ammiano,                  |
          |     |Buchanan, Carter, Fong,   |     |Charles Calderon, Davis,  |
          |     |Fuller, Furutani,         |     |Duvall, Fuentes, Hall,    |
          |     |Krekorian, Skinner,       |     |Harkey, Miller,           |
          |     |Smyth, Swanson, Torrico   |     |John A. Perez, Price,     |
          |     |                          |     |Skinner, Solorio, Audra   |
          |     |                          |     |Strickland, Torlakson,    |
          |     |                          |     |Krekorian                 |
          |-----+--------------------------+-----+--------------------------|
          |     |                          |     |                          |
           ----------------------------------------------------------------- 
           SUMMARY  :  Creates incentives for investor owned utilities (IOUs)  
          and non-utility companies to build energy storage devices that  
          store energy produced from renewable facilities.  Specifically,  
           this bill:

           1)Authorizes California Public Utilities Commission (PUC) to  
            approve an increase of between one-half of 1% and one percent  
            in the rate-of-return otherwise allowed an IOU for investment  
            by IOU in energy storage systems that store energy from  
            eligible renewable resources and dispatch that energy at a  
            later time. 

          2)Requires IOUs to incorporate cost-effective, reliable, and  
            feasible energy storage systems that reduce emissions of  
            greenhouse gases, or reduce demand for peak electrical  
            generation, or improve the reliable operation of the electric  
            grid. 
           
           3)Provides that electricity generated from an eligible renewable  
            resource that is stored by an eligible energy storage system  
            is deemed "delivered" to California customers.  
           
          EXISTING LAW  :   








                                                                  AB 44
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          1)Authorizes PUC to approve an increase of between one-half of  
            one percent and one percent in the rate-of-return otherwise  
            allowed an IOU for investment by IOU in renewable generation  
            facilities. 

          2)Requires IOUs to procure at least 20% of their electricity  
            sales from renewable resources by 2010. 

          FISCAL EFFECT  :   Minor absorbable special fund costs to PUC. 

           COMMENTS  :  According to the author, the purpose of this bill is  
          to create incentives and remove barriers for both utility-owned  
          and merchant-owned energy storage facilities.  The author  
          believes these energy storage facilities will be necessary for  
          California to meet its renewable energy goals since they can  
          store energy produced by wind and solar facilities at times that  
          electricity is not needed to be used at peak periods when  
          electricity is in high demand. 

          California law requires all retail sellers of electricity to  
          meet at least 20% of the retail sales using electricity from  
          renewable resources by 2010 - a Renewable Portfolio Standard  
          (RPS).  The California Air Resources Board (ARB) has identified  
          an advancement of RPS to 33% by 2020 as one of the key actions  
          needed to be taken in order to meet the greenhouse gas (GHG)  
          reduction goals of AB 32 (Nunez), Chapter 488, Statutes of 2006.  
           Two bills have been introduced this legislative session to  
          create the 33% RPS goals [AB 64 (Krekorian) and SB 14  
          (Simitian)]. 

          While several studies have determined that a 33% RPS is  
          achievable, it can only be met with a heavy reliance on wind and  
          solar energy.  The problem is that both resources are  
          intermittent. They only produce electricity when the wind is  
          blowing or the sun is out.  This intermittency could create  
          reliability problems for the electricity grid since the grid  
          managers cannot count on the solar and wind energy being  
          available at the same time there is demand for electricity.  One  
          way to resolve this reliability problem would be to find ways to  
          store the electrical output of renewable facilities to use hours  
          later.  

          Energy storage devices are devices that can take electricity and  








                                                                  AB 44
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          covert the electricity into some other form of energy so it can  
          be stored and converted back to electricity at some later point.  
           This bill defines storage systems to include any device that  
          stores energy generated from an eligible renewable resource  
          during off-peak periods and dispatched the energy during on-peak  
          periods.  The device must also be capable of storing energy for  
          at least two hours and must be able to respond to orders from  
          the transmission grid managers to absorb or dispatch energy. 

          The author envisions the development of storage devises that are  
          owned and operated by the utilities and storage devices that are  
          owned by private parties that could buy renewable power from  
          renewable developers or the utility and then sell that power  
          back to the utility at a later time. 

          This bill allows IOUs to earn a higher profit on investments  
          they make in energy storage devices than they do on investments  
          in natural gas generation facilities.  The higher profit concept  
          is based on Public Utilities Code Section 454.3 which allows  
          IOUs to earn higher profits on investments in renewable  
          facilities.  According to PUC, no IOU has applied for higher  
          rate-of-return under 454.3 since it was approved in 1988. 

          The bill also requires IOUs to incorporate cost-effective,  
          reliable, and feasible energy storage systems that reduce  
          emissions of greenhouse gases, or reduce demand for peak  
          electrical generation, or improve the reliable operation of the  
          electric grid. 


           Analysis Prepared by  :    Edward Randolph / U. & C. / (916)  
          319-2083 


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