BILL ANALYSIS AB 51 Page 1 Date of Hearing: April 27, 2009 ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE Felipe Fuentes, Chair AB 51 (Blakeslee) - As Amended: April 14, 2009 SUBJECT : Electrical corporation energy efficiency programs. SUMMARY : Provides that at least 90% of energy efficiency program funds expended by investor owned utilities (IOUs) are used for the direct implementation of the energy efficiency program. EXISTING LAW : 1)Requires each electrical corporation to first meet its resource needs through all available energy efficiency and demand reduction resources that are cost effective, reliable, and feasible, before it can procure other resources. 2)Establishes a Public Goods Charge (PGC) that consumers pay on electricity and natural gas consumption for cost-effective energy efficiency, renewable technologies, and public interest energy research. THIS BILL : 1)Provides that the IOUs must use at least of 90% of energy efficiency program funds for direct implementation for the energy efficiency programs. 2)Provides that "direct implementation" includes incentives and rebates but does not include administrative, marketing, and outreach costs. FISCAL EFFECT : Unknown. COMMENTS : According to the author, the purpose of this bill is to ensure that more ratepayer funds for energy efficiency programs are accessible to ratepayers, while maintaining flexibility for utilities to manage the programs at their discretion. 1) Background : AB 1890 (Brulte), Chapter 854, Statutes of 1996, AB 51 Page 2 required electric utility ratepayers to fund a variety of system reliability and low-income customer programs at specified levels from 1998 through 2001 through a public goods charge (PGC). Subsequent legislation has extended the collection of the PGC until 2012. IOUs are required by statute to use the PGC revenues to fund energy efficiency, renewable energy, research, and low-income customer assistance. In 2005 and 2006, the PUC issued decisions that required the three major IOUs to make significant additional investments in energy efficiency that went beyond the PGC programs. The PUC decision required IOUs to spend $2.7 billion over a three-year period. The decision more than doubled the amount of funds the IOUs were required to spend through the Legislative approved PGCs. When the PUC approved the decisions, they anticipated that for the years between 2006 and 2008 the three largest IOUs would spend $2.7 billion on energy efficiency programs. The programs would result in a 1,448 MW savings and $4.9 billion in savings to the utility. This would be a net savings of $2.7 billion ($4.9 billion in overall savings - $2.2 billion in expenditures). 2) How was the money spent : According to information provided by the PUC in the 2006 - 2008 program cycle the IOUs on average spent 12.4% of the program funds on the categories the PUC defined as administrative costs. The IOUs spent an additional 12% of the funds on marketing and outreach. The IOUs spent 75.6% of the funds on actual energy efficiency incentives and rebates. In the past, this committee has generally capped allowable administrative expenses for programs using public or ratepayer funds at 10%. 3) If a tree falls in the forests and there is no one there : AB 51 requires that that 90% of the funds be allocated to incentives and rebates. This allocation of the funds would likely require the IOUs to eliminate all marketing and outreach programs. Marketing and outreach is not typically considered part of the administrative expenses of energy efficiency programs. In fact, some of the energy efficiency funds spent by the IOUs on AB 51 Page 3 marketing are actually spent on campaigns that directly promote conservation. The Flex Your Power Campaign is an example of using marketing funds to ask customers to conserve electricity. The marketing funds are also used to promote the rebate programs. Without a marketing campaign, the effectiveness of the rebates and grants could decline since few customers will be aware of the programs. The committee may wish to consider amending the bill to provide that 90% of the funds be allocated to program implementation including marketing and outreach. REGISTERED SUPPORT / OPPOSITION : Support California Association of Realtors The Utility Reform Network (TURN) Opposition Pacific Gas and Electric (PG&E) Sempra Energy Analysis Prepared by : Edward Randolph / U. & C. / (916) 319-2083