BILL ANALYSIS                                                                                                                                                                                                    
                                                                       
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          |SENATE RULES COMMITTEE            |                    SB 17|
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                                 THIRD READING
          Bill No:  SB 17
          Author:   Padilla (D), et al
          Amended:  5/5/09
          Vote:     21
           
           SENATE ENERGY, U.&C. COMMITTEE  :  10-0, 4/27/09
          AYES:  Padilla, Benoit, Corbett, Cox, Kehoe, Lowenthal,  
            Simitian, Strickland, Wiggins, Wright
          NO VOTE RECORDED:  Calderon
           SENATE APPROPRIATIONS COMMITTEE  :  8-0, 5/26/09
          AYES:  Kehoe, Cox, Corbett, DeSaulnier, Leno, Wolk, Wyland,  
            Yee
          NO VOTE RECORDED:  Denham, Hancock, Oropeza, Runner,  
            Walters
           SUBJECT  :    Electricity:  smart grid systems
           SOURCE  :     Author
           DIGEST  :    This bill establishes the smart grid policy of  
          the state and requires the California Public Utilities  
          Commission to determine the requirements for a smart grid  
          deployment plan no later than July 1, 2011.
           ANALYSIS  :    Existing 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)  Existing  
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          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)
          Existing 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 requires the commission, by July 1, 2010, and in  
          consultation with the State Energy Resources Conservation  
          and Development Commission (Energy Commission), the  
          Independent System Operator (ISO), and other key  
          stakeholders, to determine the requirements for a smart  
          grid deployment plan consistent with the policies set forth  
          in the bill and federal law.  This bill requires that the  
          smart grid improve overall efficiency, reliability, and  
          cost-effectiveness of electrical system operations,  
          planning, and maintenance. The bill would require each  
          electrical corporation, by July 1, 2011, to develop and  
          submit a smart grid deployment plan to the commission for  
          approval.
          This bill authorizes a smart grid deployment plan that is  
          adopted to provide for deployment of smart grid products,  
          technologies, and services by entities other than  
          electrical corporations.  The bill authorizes smart grid  
          technologies to be deployed in an incremental manner to  
          maximize the benefit to ratepayers and to achieve the  
          benefits of smart grid technology, authorizes the  
          commission to modify or adjust the bill's requirements for  
          an electrical corporation with fewer than 100,000 service  
          connections as individual circumstances merit, and would  
          require the commission, in consultation with the Energy  
          Commission, the ISO, and electrical corporations, at each  
          step of deployment, to evaluate the impact of deployment on  
          major initiatives and policies.  The bill requires the  
          commission to report, by January 1, 2011, and by January 1  
          of each year thereafter, to the Governor and the  
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          Legislature on the commission's recommendations for a smart  
          grid, the plans and deployment of smart grid technologies  
          by the state's electrical corporations, and the costs and  
          benefits to ratepayers.
          The bill requires a local publicly owned electric utility,  
          as defined, to develop by July 1, 2011, a smart grid  
          deployment plan consistent with the policies set forth in  
          federal law.
           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:
                  A.        Conduct remote meter reading, pinpoint  
                    outages, remote turn off/turn on capability,  
                    provide more accurate billing, and prevent energy  
                    theft;
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                  B.        Monitor electrical load on an hourly  
                    basis to enable a utility to more accurately  
                    forecast load and identify load centers;
                  C.        Enable two-way communication to each  
                    customer's meter; and
                  D.        Offer time varying rates to customers.
          Each of the three IOUs is in the process of deploying smart  
          meters as follows:
                  A.        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;
                  B.        San Diego Gas & Electric, 1.4 million  
                    electric and 900,000 gas meters at a cost of $572  
                    million by 2011; and
                  C.        Southern California Edison, 5.3 million  
                    electric meters at a cost of $1.7 billion by  
                    2012.
           Prior Legislation  
          In 2008, a similar bill, SB 1438 (Padilla), which was held  
          in the Assembly Appropriations Committee.
           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  Yes    
          Local:  Yes
          According to the Senate Appropriations Committee:
                          Fiscal Impact (in thousands)
           Major Provisions                2009-10     2010-11     
           2011-12   Fund  
          PUC regulations                                    
          Absorbable within existing resources              Special*
          CEC consultation         $50       $100      $100 Special**
          * PUC Utilities Reimbursement Account
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          ** Public Interest Research, Development and Demonstration  
          Fund
           SUPPORT  :   (Verified  5/27/09)
          AT&T
          California Public Utilities Commission
          Clean Power Campaign
          Natural Resources Defense Council
          Optical Technologies
          Sempra Energy
          Sierra Club
          Southern California Edison
          Tech Net
          Valley Industry and Commerce Association 
           OPPOSITION  :    (Verified  5/27/09)
          Utility Services Customer Link (unless amended)
           ARGUMENTS IN SUPPORT  :    Sempra Energy states in support,  
          "The future Smart Grid will allow real-time, two-way  
          digital communications between electric utilities and their  
          customers, on the electric grid.  The features can greatly  
          improve the efficiency and reliability of electric  
          distribution systems through self-healing capabilities, and  
          facilitate conservation by enabling real-time demand  
          response pricing.  Smart Grid systems will permit the state  
          to empower consumers and leverage distributed energy  
          resources to increase distribution efficiently; lower  
          customer prices; stimulate innovation and new green job  
          creation; and ultimately reduce emissions of greenhouse  
          gas."
           ARGUMENTS IN OPPOSITION  :    The opposition states that the  
          bill does not define the term "smart meter" or require that  
          the meters to be used and installed be "smart meters."  It  
          does not provide consumers with the ability to purchase a  
          remote stand alone real time information display that  
          communicates with the meter and provides the consumer with  
          the information contained in the meter's memory registers  
          that can be used to derive rate, energy usage, and  
          accumulated cost, and although there is a specific date in  
          which electrical corporations have to develop and submit a  
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          smart grid deployment play by, there is no specific  
          "implementation" date.  That means that the companies can  
          provide the plan, but drag their feet with respect to  
          implementation.  They would like to see amendments be taken  
          to accomplish this.  
           
          DLW:nl  5/27/09   Senate Floor Analyses 
                         SUPPORT/OPPOSITION:  SEE ABOVE
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