BILL ANALYSIS                                                                                                                                                                                                              1
          1





                SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
                                 ALEX PADILLA, CHAIR
          

          SB 17 -  Padilla                                  Hearing Date:   
          April 27, 2009             S
          As Amended:         April 20, 2009           FISCAL       B

                                                                        1
                                                                        7
                                                                        
                                      DESCRIPTION
          
           Current federal law  requires each state to consider investment  
          in a qualified smart grid system and directs the National  
          Institute of Standards and Technology to coordinate the  
          development of smart grid standards.  (Energy Independence and  
          Security Act of 2007)

           Current federal law  authorizes the Department of Energy to award  
          $4 billion in grants ranging from $500,000 to $20 million for  
          smart grid technology deployments and grants of $100,000 to $5  
          million for the deployment of grid monitoring devices.   
          (American Reinvestment and Recovery Act of 2009)

           Current state law  requires investor owned utilities (IOUs) to  
          operate its electric distribution grid in a safe, reliable,  
          efficient, and cost-effective manner and authorizes the  
          California Public Utilities Commission (CPUC) to give each IOU a  
          reasonable opportunity to fully recover from all customers the  
          costs of operating the distribution system.

           This bill  establishes smart grid as the policy of the state and  
          requires the CPUC to determine the requirements for a smart grid  
          deployment plan no later than July 1, 2010; subsequently, IOUs  
          would be required to adopt a plan for implementation of a smart  
          grid no later than July 1, 2011.  Publicly owned utilities with  
          more than 100,000 service connections would also be required to  
          develop a smart grid deployment plan consistent with federal law  
          by July 1, 2011.

                                      BACKGROUND
           
           What is a Smart Grid?  - The term smart grid refers to a  











          distribution system that allows for the flow of information from  
          a customer's meter in two directions and modernizes the electric  
          distribution and transmission grid with a goal of using  
          advanced, information-based technologies to increase power grid  
          efficiency, reliability, and flexibility, and reduce the rate at  
          which additional electric utility infrastructure needs to be  
          built.  A smart grid is a key element to the greening of  
          California's grid due to the intermittent nature of renewable  
          electricity resources such as wind and solar.

          The most vital step in transforming California's distribution  
          grid into an intelligent, integrated network enabled by modern  
          information and control system technologies is deployment of an  
          advanced meter infrastructure (AMI or smart meters).  

           Smart Meters  - California's attempts to educate its grid have  
          begun with the deployment of smart meters which is one of  
          hundreds of possible applications that constitute a smart grid.   
          For the last several years, the CPUC has encouraged the IOUs to  
          increase demand response and implement dynamic pricing tariffs  
          as a means of reducing energy demand during peak periods which  
          cannot be done without a smart meter.  The technology also  
          allows a utility to:

                 Conduct remote meter reading, pinpoint outages, remote  
               turn off/turn on capability, provide more accurate billing,  
               and prevent energy theft;
                 Monitor electrical load on an hourly basis to enable a  
               utility to more accurately forecast load and identify load  
               centers;
                 Enable two-way communication to each customer's meter;  
               and
                 Offer time varying rates to customers.

          Each of the three IOUs is in the process of deploying smart  
          meters as follows:

                 Pacific Gas & Electric, 5.1 million electric and 4.2  
               million gas meters at a cost of $2.2 billion to be  
               completed by 2011;
                 San Diego Gas & Electric, 1.4 million electric and  
               900,000 gas meters at a cost of $572 million by 2011; and
                 Southern California Edison, 5.3 million electric meters  
               at a cost of $1.7 billion by 2012.











                                       COMMENTS
           
              1.   If I Only Had a Brain  - The term smart grid is one of  
               the most overused, undefined terms in the electric industry  
               today.  In the past a number of projects have been labeled  
               "smart" but turned out not to be.  A working definition of  
               the term is long overdue, especially now that it has found  
               its way into federal legislation.  This bill addresses this  
               void by requiring the CPUC to clearly define what the smart  
               grid will be for California, provide clear direction on its  
               development and when it will be operational.  The CPUC has  
               a rulemaking underway to consider policies for California's  
               IOUs to develop a smarter electric grid in the state.  The  
               proceeding will consider setting policies, standards and  
               protocols to guide the development of a smart grid system  
               and facilitate integration of new technologies such as  
               distributed generation, storage, demand-side technologies,  
               and electric vehicles. 

              2.   Cost Recovery  - When an IOU procures equipment for the  
               purpose of providing electric service to its ratepayers,  
               the CPUC has the authority to determine what expenditures  
               will be recoverable from ratepayers and the method by which  
               the expenditures will be recovered.  This bill also  
               addresses cost recovery for smart grid but appears to be  
               unnecessary and may be inconsistent with the CPUC's current  
               rate recovery policies.   The author may wish to consider   
               striking these provisions (page 4, lines 29-35 and page 5,  
               lines 4-12) related to cost recovery for smart grid costs  
               since authority exists in current law.

              3.   Ratepayer Impacts  - There will be additional ratepayer  
               costs for the deployment of a smart grid but those costs  
               cannot be identified since there is not yet a definition,  
               protocol or plan for the state.  As identified in the  
               background, the cost of deploying meters alone exceeds $4.8  
               billion.  

               Depending on its design and deployment a smart grid could  
               result in mitigating the likely increased costs of  
               electricity through such programs as demand response.   
               Customers would also benefit from: enhanced utility service  
               reliability; more stable, higher-quality electricity  










               supply; short customer outages, and faster service  
               restoration.

              4.   Reporting Requirement  - The bill requires (page 5, lines  
               17-23) the CPUC to evaluate the impact of deployment on  
               specified initiatives and policies at each step of  
               deployment.   The author may wish to consider  striking this  
               phrase and require that the CPUC report to the Legislature  
               annually on its smart grid progress.

              5.   Prior Legislation - In 2008 the author carried a largely  
               similar bill, SB 1438, which was held in the Assembly  
               Appropriations Committee.

                                       POSITIONS
           
           Sponsor:
           
          Author

           Support:
           
          California Public Utilities Commission (with amendments)
          Clean Power Campaign (with amendments)
          Coalition of California Utility Employees
          Sempra Energy

           Oppose:
           
          Utility Services Customer Link

          










          Kellie Smith 
          SB 17 Analysis










          Hearing Date:  April 27, 2009