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,  








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          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  








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          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