BILL ANALYSIS Ó ------------------------------------------------------------ |SENATE RULES COMMITTEE | SB 790| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ UNFINISHED BUSINESS Bill No: SB 790 Author: Leno (D) Amended: 08/30/11 Vote: 21 SENATE ENERGY, UTILITIES & COMM. COMMITTEE : 6-4, 05/03/11 AYES: Berryhill, Corbett, DeSaulnier, Pavley, Rubio, Simitian NOES: Padilla, Fuller, Strickland, Wright NO VOTE RECORDED: De León SENATE APPROPRIATIONS COMMITTEE : 6-2, 05/26/11 AYES: Kehoe, Alquist, Lieu, Pavley, Price, Steinberg NOES: Walters, Runner NO VOTE RECORDED: Emmerson SENATE FLOOR : 24-12, 06/02/11 AYES: Alquist, Berryhill, Blakeslee, Corbett, Correa, De León, DeSaulnier, Evans, Gaines, Hancock, Harman, Hernandez, Huff, Kehoe, Leno, Lieu, Lowenthal, Pavley, Price, Rubio, Simitian, Steinberg, Wolk, Yee NOES: Anderson, Calderon, Cannella, Dutton, Emmerson, Fuller, La Malfa, Padilla, Strickland, Walters, Wright, Wyland NO VOTE RECORDED: Liu, Negrete McLeod, Runner, Vargas ASSEMBLY FLOOR : Not available SUBJECT : Electricity: community choice aggregation SOURCE : Marin Energy Authority CONTINUED SB 790 Page 2 Sierra Club California San Francisco Public Utilities Commission DIGEST : This bill revises and expands the definition of Community Choice Aggregation (CCA), require the California Public Utilities Commission (PUC) to initiate a Code of Conduct rulemaking, and allow CCAs to receive Public Purpose funds to administer energy efficiency programs. Assembly Amendments (1) make clarifying and technical changes to the Senate version of the bill, and (2) determine that this act shall be known, and may be cited, as the Charles McGlashan Community Choice Aggregation Act. ANALYSIS : Existing law: 1.Allows cities and counties to procure and sell electricity within their community via a direct access arrangement called for CCA. 2.Requires electric utilities to cooperate fully with CCAs that investigate, pursue, or implement CCA programs. This bill: 1.Memorializes a late-County Supervisor by naming this act. 2.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. 3.Requires PUC to consider the impact if it finds that an electrical corporation has violated the requirement to cooperate fully with a community choice aggregator. 4.Establishes a time period by which the PUC must resolve complaints against an electric utility which allege a violation of statutes and rules governing electric utilities that require the utility to cooperate with CCAs. CONTINUED SB 790 Page 3 5.Affirms that the PUC shall not allow cost shifting of nonbypassable charges from CCA customers to utility ratepayers and specifies that a CCA is solely responsible for all generation procurement activities on behalf of its customers, except where other generation procurement arrangements are expressly authorized by statute. 6.Modifies the PUC's current authority to establish procurement requirements from its current requirement in proportion to the costs recovered from ratepayers to instead require fair and equitable distribution of costs. 7.Requires PUC, by March 2012 to establish a code of conduct to ensure that an electrical corporation does not market against a CCA except through an independent marketing division. Background CCAs are governmental entities formed by cities and counties to serve the energy requirements of their local residents and businesses. The state Legislature has expressed the state's policy to permit and promote CCAs by enacting AB 117 (Migden, 2001) which authorized the creation of CCAs, described essential CCA program elements, required the state's IOUs to provide certain services, and established methods to protect existing utility customers from liabilities that they might otherwise incur when a portion of the IOU's customers transfer their energy services to a CCA. Cities and counties have become increasingly involved in implementing energy efficiency programs, advocating for their communities in power plant and transmission line siting cases, and developing distributed generation and renewable resource energy supplies. The CCA program takes these efforts one step further by enabling communities to purchase power on behalf of the community. Although adopted several years ago, to date only one region has been successful in implementing a CCA. Several cities joined together in Marin County and formed, under a joint CONTINUED SB 790 Page 4 powers authority, "Marin Clean Energy." The CCA program is new in California and there is little experience with such a program anywhere. The CPUC has sought to anticipate every contingency on the one hand and permit some flexibility on the other with the expectation that the IOUs and CCAs may be able to tailor operational arrangements according to circumstances in ways that promote program efficiency and fairness. The CPUC must adopt rules for the IOU in order that it may provide adequate service to the CCA and its customers while simultaneously protecting IOU bundled customers and grid reliability. Nothing in the statute directs the CPUC to regulate the CCA's program except to the extent that its program elements may affect utility operations and the rates and services to other customers. Deregulation . California's experiment with deregulation was launched in 1996 when the Legislature passed AB 1890 (Brulte, 1996), to restructure the electric industry. One of the key features of electrical restructuring was the authorization of retail competition within IOU service areas. AB 1890 ended the service monopoly of utilities and authorized retail customers to purchase energy directly from suppliers. These transactions are known as "direct access." Community aggregation is a form of direct access where, for example, a city may act as a purchasing agent on behalf of its residents. Before the energy crisis in 2001, non-IOU providers (direct access providers) had enrolled customers but then failed to provide the power ordered. The customers returned to the IOUs for service but the utilities did not have the electric generation resources to serve those customers because they had left IOU service. In response the Legislature mandated that the IOUs maintain resource adequacy for current customers and those customers that could return to IOU service. This experience has guided the CCA law and rules adopted by the CPUC which are the subject of this bill. IOU Responsibility Does Not End . A critical driver of CCA and direct access policies is that any CCA or DA customer can terminate service on a moment's notice and return to IOU service. Should they do so, or should the DA or CCA provider fail to provide sufficient power, the IOU is CONTINUED SB 790 Page 5 always and ultimately responsible to provide that power. Comments According to the author's office, SB 790 strengthens existing law by clarifying, amending and adding key provisions that enable CCA to function as originally intended, foster fair market competition, and allow jurisdictions to pursue CCA without undue barriers and excessive burdens. Much has been learned from the experience of communities that have unsuccessfully attempted community choice aggregation in the last few years, and from Marin County, the only county that has succeeded in launching a CCA in the state of California. That experience has demonstrated certain deficiencies in existing law that has rendered CCA excessively difficult to implement and operate. The California Public Utilities Commission recently found that utility opposition, coupled with lack of clarity regarding certain statutory provisions, have forced some CCA efforts to be abandoned. This has had the damaging effect of discouraging other communities from considering CCA, thus impeding the environmental, consumer choice, and economic benefits associated with community aggregation. SB 790 seeks to level the playing field for local governments seeking to establish a CCA program. A genesis of this bill has been PG&E's atrocious behavior surrounding the establishment of the Marin Energy Authority and its CCA program Marin Clean Energy. PG&E representatives attending local hearings commonly misrepresented how the CCA mechanism works, commonly stated that taxpayers were liable for the costs of failed CCA programs despite CPUC decision 08-04-056, and the utility was reprimanded for soliciting opt-outs from outside the official process and for implying that to receive public good charge funded energy efficient benefits, customers must opt out of CCA. Related Legislation AB 976 (I. Hall) prohibits a CCA from procuring electricity or energy services from any entity that provided any analysis, advice, consultation, or other services to the CONTINUED SB 790 Page 6 community choice aggregator to aid in its formation. FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes Local: Yes According to the Assembly Appropriations Committee, the PUC estimates additional workload demands of about $430,000. These costs include two regulatory analysts, one administrative law judge and one legal analyst, to implement the bill, which will include reviewing and certifying CCAs as administrators of energy efficiency and conservation programs; implementing the new stricter rules related to utility marketing with regard to a CCA formation; conducting the complaint review process regarding CCA formation, conducting proceedings to implement the new rules for determining direct and indirect benefits to CCA customers when the utilities are directed to procure generation resources for system and for local area reliability; and addressing issues that may arise if CCAs are no longer local community load aggregators but expand beyond the local communities into other jurisdictions. (Public Utilities Reimbursement Account). SUPPORT : (Verified 9/8/11) Marin Energy Authority (co-source) Sierra Club California (co-source) San Francisco Public Utilities Commission (co-source) AARP California State Association of Counties City and County of San Francisco City of Arcata City of Berkeley City of El Cerrito City of Petaluma City of Richmond City of San Jose Climate Protection Campaign Division of Ratepayer Advocates, CPUC Environment California Graton Community Services District, County of Sonoma Kings River Conservation District League of California Cities Local Clean Energy Alliance of the Bay Area CONTINUED SB 790 Page 7 Marin County Board of Supervisors Marin County Council of Mayors and Council Members San Francisco Local Agency Formation Commission Santa Clara County Board of Supervisors Sonoma County Conservation Action Sonoma County Regional Climate Protection Authority Sonoma County Regional Climate Protection Authority Sonoma County Water Agency Sustainable Mill Valley The Utility Reform Network Town of San Anselmo Town of Windsor OPPOSITION : (Verified 9/8/11) Associated Builders and Contractors of California San Diego Gas & Electric Company (unless amended) Sempra Energy (unless amended) Southern California Gas Company (unless amended) Southern California Edison (unless amended) ARGUMENTS IN SUPPORT : Kings River Conservation District (KRCD) writes in support of this bill, "In our effort to implement a Community Choice Aggregation (CCA) in the San Joaquin Valley, KRCD experienced numerous obstacles. SB 790 would promote competition by lifting as many of the barriers that have prevented local agencies including KRCD and its surrounding communities from implementing CCA in their regions. SB 790 would also expand authorization to implement CCA to limited number of special districts, including KRCD, which are authorized and qualified to generate and deliver electricity. SB 790 will help bring to fruition the consumer choice, environmental and economic benefits associated with and originally envisioned in community aggregation programs." RM:nl 9/8/11 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END **** CONTINUED SB 790 Page 8 CONTINUED