BILL ANALYSIS Ó SB 790 Page 1 Date of Hearing: June 27, 2011 ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE Steven Bradford, Chair SB 790 (Leno) - As Amended: June 22, 2011 SENATE VOTE : 24-12 SUBJECT : Electricity: Community Choice Aggregation SUMMARY : This bill will revise and expand the definition of Community Choice Aggregation (CCA), require the PUC to initiate a Code of Conduct rulemaking, and allow CCAs to receive Public Purpose funds to administer energy efficiency programs. Specifically, this bill : 1)Expands the entities defined as CCAs to include the Kings River Conservation District, the Sonoma County Water Agency, and any California public agency possessing statutory authority to generate and deliver electricity at retail within its designated jurisdiction. 2)Require that utilities provide electrical load data to a CCA. 3)Require the California Public Utilities Commission (PUC) commission to consider the impact if it finds that an electrical corporation has violated the requirement to cooperate fully with a community choice aggregator 4)Revise resource adequacy and cost responsibility requirements as they relate to community choice aggregators. 5)Require the commission to authorize a CCA to be a 3rd-party administrator for energy efficiency programs financed through nonbypassable system benefits charges for its electric service customers of cost-effective energy efficiency and conservation programs or to direct a proportional share of energy efficiency activities to the CCA customers if the CCA is not the 3rd party administrator. 6)Clarify customer disclosure requirements regarding electing to participate in a CCA. 7)Requires customers who revert from a CCA back to the electric utility to have no more than a 12 month service requirement. 8)Modifies customer data transfers to clarify that an electrical utility is not required to obtain a customer's consent before providing electricity needs, patterns of usage, and other data if the CCA will agree to reasonable safeguards. 9)Requires the PUC, by March 2012 to establish a code of conduct to ensure that an electrical corporation does not market SB 790 Page 2 against a CCA except through an independent marketing division that is funded exclusively by the electrical corporation's shareholders and that is functionally and physically separate from the electrical corporation's ratepayer-funded divisions; limit the electrical corporation's independent marketing division's use of support services from the electrical corporation's ratepayer-funded divisions, and ensure that the electrical corporation's independent marketing division has allocated costs of any permissible support services from the electrical corporation's ratepayer-funded divisions on a fully allocated embedded cost basis; and ensure that the electrical corporation's independent marketing division does not have access to competitively sensitive information; and incorporate rules to facilitate the development of CCAs, to foster fair competition or to protect against cross-subsidization paid by ratepayers. EXISTING LAW Allows cities and counties to procure and sell electricity within their community via a direct access arrangement called for community choice aggregation (CCA). Requires electric utilities to cooperate fully with CCAs that investigate, pursue, or implement CCA programs. FISCAL EFFECT : Unknown COMMENTS : According to the author SB 790 affirms CCA procurement autonomy, protects both bundled service and CCA ratepayers, and corrects abuses of market power by IOUs regarding the launch and operation of CCA programs. SB 790 would help level the playing field for local governments seeking to establish a CCA program. 1)Background : In 2002, AB 117 established a local government's right to implement Community Choice Aggregation (CCA), a program that allows communities to pool, or aggregate, the electric load of their residents, businesses and other institutions in order to procure and generate electricity on their behalf. In the nine years since local governments were given the right to establish CCAs, only one CCA program has been successfully launched despite numerous community efforts to do so. SB 790 Page 3 The CCA mechanism allows local governments to procure electricity on behalf of their residents and businesses, while the existing utility provides distribution, transmission and billing services. Often described as a hybrid model, CCA focuses on the procurement and generation side of the energy business, partnering with existing electrical corporations such as PG&E for power transmission and distribution, line maintenance, and customer billing. 2)Consent to access private customer data. Current law allows transfer of customer data from a utility to a CCA but is currently silent on whether a customer's consent is needed in order to provide private customer data to a CCA. This bill would clarify provisions regarding transferring individual customer data to a CCA so that consent is not required by the customer. 3)Special Treatment for Switching back-and-forth . Under current law and PUC policies, CCA as well as Direct Access (DA) customers are subject to a 3-year minimum stay requirement to prevent customers from going back and forth between the utility and non-utility providers and taking advantage of short term variations in rates between utilities. Frequent shifting of customers makes it difficult to procure the power and can result in cost shifts from the switching-customers to customers that do not have the ability to change providers. According to the PUC, this bill would grant preferential treatment to CCA customers by reducing the current 3 year stay to 12 months and make it difficult for the utilities to plan their systems. 4)Administration of Energy Efficiency Programs. This bill would allow a CCA may administer its own energy efficiency programs and establish its measurement and verification protocols. The State's energy efficiency programs are developed and approved by the PUC with close involvement and participation with the California Energy Commission and the California Air Resources Board as well as members of the public. Allocation a portion of the energy efficiency program to an independent entity, without oversight, could lead to more requests that diminish the funds available for the PUC to allocate to the areas in most need and potentially diminish efforts to achieve statewide energy efficiency goals. The PUC has a process where organizations may intervene in the energy efficiency proceedings. In addition, community-based organizations are SB 790 Page 4 currently delivering energy efficiency assistance in communities. CCAs should participate in the PUC proceedings so that the priorities of the CCA can be considered along with statewide priorities. It is further troubling that if this provision is approved, the allocation of funds according to the presence of a CCA would not necessarily be based on climatic or socioeconomic considerations. For example, the PUC has approved many programs to provide assistance to low-income households and programs to address reducing cooling costs in regions where air conditioning is a health and safety requirement. 5)Cost shifting between CCA customers and bundled utility customers. According to the author, "the status quo has CCA customers subsidizing for-profit IOUs," The PUC does not agree with this assertion. According to the PUC the Commission has imposed charges on CCA customers for costs "incurred to serve utility customers that are now CCA customers. In addition, CCAs are required to pay for some generation costs related to local and system resource adequacy. The Resource Adequacy charges include charges such as the reserve margin. Left to themselves, the CCAs preference would be to contract for just enough capacity to serve their load and to depend on the utilities for any unforeseen variations in their load or disruptions in their supply. If the CCA generation is short of load, the utility still has to supply the power to their customers. Again, the CCAs preference would be to pay charges for the power as and if a shortage occurred. However, the nature of electric business is such that you have to have reserve margins and contingency plans for those situations. The Commission imposes such contingency planning through system and local RA. CCAs insist that unless they benefit directly from those resources they should not have to pay or should get a proportional benefit. It is not a reasonable argument." Resource Adequacy (RA) describes the policy used to ensure safe and reliable operation of the electricity grid at all times. This means that if a power plant must be built in order to meet the needs of a safe and reliable grid, then that expenditure to build that plant must occur. All load serving entities have RA obligations to ensure that there is sufficient capacity to supply customers when and where needed. This bill would provide that CCA receive credits or SB 790 Page 5 allocation of benefits to the extent that the CCA paid estimated net unavoidable electricity costs paid a utility for compliance costs or the CCA provided compliance benefits to a utility for the RPS or the California Greenhouse Gas Solutions Act Regulations. This provision should also state that when implemented there cannot be a cost shift between CCA and bundled utility customers. The CCAs should be exempt from paying the charges only if they are self-sufficient in every aspect of serving their load and if their inadequacy did not impact bundled ratepayers in cost or reliability of service. The author may wish to consider the following amendments: 1.Require written consent from customers before providing private customer data to a CCA. 2.Add a provision that the governing body of a community choice aggregator adopt a policy that expressly prohibits the dissemination by the community choice aggregator of any statement relating to the community choice aggregator's rates or terms and conditions of service that is untrue or misleading, and which is known, or which by the exercise of reasonable care should be known, to be untrue or misleading. 3.Remove provisions regarding Resource Adequacy that would create cost shifting of CCA charges to bundled utility customers. 4.Remove provisions for separate administration of energy efficiency programs by a CCA. REGISTERED SUPPORT / OPPOSITION : Support AARP California Arcata City Council California State Association of Counties (CSAC) City of El Cerrito City of Petaluma City of San Jose Climate Protection Campaign Environment California Graton Community Services District Kings River Conservation District ("KRCD") League of California Cities SB 790 Page 6 Local Clean Energy Alliance Marin Clean Energy Marin County Board of Supervisors Marin County Council of Mayors and Council Members (MCCMC) Marin Energy Authority Mayor Gayle McLaughlin, City of Richmond San Anselmo Town Council San Francisco Local Agency Formation Commission San Francisco Public Utilities Commission (SFPUC) (Co-sponsor) Santa Clara County Board of Supervisors Sierra Club California (Co-sponsor) Sonoma County Conservation Action Sonoma County Regional Climate Protection Authority (RCPA) Sonoma County Water Agency Sustainable Mill Valley The Utility Reform Network (TURN) Town of San Anselmo Town of Windsor Opposition California Public Utilities Commission (CPUC) (unless amended) San Diego Gas & Electric (SDG&E) (unless amended) Southern California Edison (SCE) (unless amended) Analysis Prepared by : Susan Kateley / U. & C. / (916) 319-2083