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 ----------------------------------------------------------------- |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 Page 2 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 Page 3 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 FN: 0001345