BILL ANALYSIS Ó
SB 870
Page 1
SENATE THIRD READING
SB 870 (Padilla and Steinberg)
As Amended September 6, 2011
Majority vote
SENATE VOTE :Vote not relevant
NATURAL RESOURCES 6-3
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|Ayes:|Chesbro, Brownley, | | |
| |Dickinson, Huffman, | | |
| |Monning, Skinner | | |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Knight, Grove, Halderman | | |
| | | | |
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SUMMARY : Establishes the California Energy Innovation Program
(CEIP) for the purpose of funding energy-related research,
development, and demonstration (RD&D), contingent on
reauthorization of public goods charge (PGC) funding for RD&D.
Specifically, this bill :
1)Establishes CEIP as a successor to the California Energy
Commission's (CEC) Public Interest Energy Research Program
(PIER). CEIP's purpose is to fund RD&D projects that may lead
to technological advancement and breakthroughs to overcome the
barriers that prevent the achievement of the state's energy
policy goals.
2)Requires the CEC to convene twice-yearly meetings of a 27-plus
member coordinating council consisting of:
a) The chair of the CEC, who serves as the chair of the
council.
b) One representative each from utilities, including
Pacific Gas and Electric, Southern California Edison, San
Diego Gas and Electric, Southern California Gas, and any
participating publicly owned utility.
c) One representative each from the Public Utilities
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Commission (PUC), the Independent System Operator, the Air
Resources Board, and the PUC's Division of Ratepayer
Advocates.
d) Two representatives each from the building industry,
consumer organizations, environmental organizations,
environmental justice groups, and research institutions,
with appointment divided between the Senate Rules Committee
and the Speaker of the Assembly.
e) Two representatives of clean energy businesses,
associations, or investors appointed by the Governor.
f) Two representatives of labor organizations appointed by
the Governor.
g) Two at-large members appointed by the Governor.
h) A Senator appointed by the Senate Rules Committee and an
Assembly Member appointed by the Speaker of the Assembly,
who may participate on the council to the extent
participation is not incompatible with their positions as
legislators.
3)Requires the council to annually identify energy barriers for
which CEIP funding is most warranted, identify opportunities
for leveraged funding, and make recommendations to avoid
duplicative funding of projects.
4)Requires the CEC to spend CEIP funds for projects and program
implementation that results in a portfolio of awards that does
all of the following:
a) Is strategically focused and sufficiently narrow to make
advancement on the most significant barriers to achieving
the state's energy policy goals, including energy storage,
renewable energy and its integration into the electrical
grid, energy efficiency, integration of electric vehicles
into the electrical grid, accurately forecasting the
availability of renewable energy for integration into the
grid, impacts of energy generation, and other significant
technological barriers identified by the coordinating
council;
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b) Ensures that prior, current, and future RD&D projects
are not unnecessarily duplicated;
c) Invests in projects of California-based entities unless
there is a unique need that can be met only by an entity
based outside of California;
d) Results in a reasonably equitable distribution of awards
to various geographic regions of California; and,
e) Maximizes expenditure of funds for RD&D projects and
minimizes expenditure of funds for administration and
overhead costs.
5)Permits a utility to receive CEIP funds only if it
participates in the program.
6)Requires the CEC to adopt regulations, or modify existing
regulations, for the solicitation of award applications,
evaluation of applications, and award of funds.
7)Requires the CEC, prior to awarding any CEIP funds, to
establish a process for tracking the progress and outcomes of
each funded project and terms for the state to accrue any
intellectual property interest or royalties that may derive
from CEIP funding.
8)Authorizes the CEC to solicit applications and award CEIP
funds using a sealed competitive bid, interagency agreement,
or sole source method.
9)Requires uses of sealed competitive bid in all cases in which
project bids are specific enough to be evaluated against
solicitation criteria.
10)Prohibits the CEC from awarding funds to the University of
California (UC) through sole source or interagency agreement
for a project for which funds could be awarded through a
sealed competitive bid.
11)Authorizes, if an award cannot be made using competitive bid,
the CEC to award funds on a sole source basis when the cost to
the state is reasonable and the proposal is either
unsolicited, unique, or is a continuation of an existing,
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multi-phased project.
12)Prohibits the CEC from making a sole source award, or a sole
source or interagency agreement with the UC, unless the CEC
notifies the Joint Legislative Budget Committee (JLBC) and
relevant policy committees at least 60 days prior to making
the award, and the JLBC either approves or does not disapprove
the award with the 60 days.
13)Provides that the provisions of the section containing these
bidding requirements are severable.
14)Requires the CEC to give priority to California-based
entities.
15)Requires the CEC to submit an annual report to the
Legislature describing projects awards and outcomes of
previously-funded projects.
16)Requires the CEC to establish procedures to protect
confidential or proprietary information in public reports.
17)Repeals the requirement that the natural gas surcharge
collected by PUC-regulated gas utilities natural gas public
purpose programs, be remitted to the Board of Equalization
(BOE), thereby removing the availability of these monies for
redirection by the Legislature to the General Fund.
18)Provides that existing PIER statutes apply to the expenditure
of PGC funds collected for RD&D before January 1, 2012.
19)Provides that enactment of the bill is contingent on
enactment of AB 724 (Bradford), which reauthorizes the PGC,
including dedicating $75 million per year for eight years for
RD&D.
EXISTING LAW :
1)Requires electric utilities to collect until January 1, 2012,
a "nonbypassable" surcharge on bills based on electricity
usage to fund energy efficiency, renewable energy, and energy
RD&D (i.e., the "public goods charge").
2)Establishes specific minimum annual collection amounts for the
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three largest investor-owned utilities (Pacific Gas and
Electric, Southern California Edison and San Diego Gas and
Electric) and provides for adjustment according to the lesser
of sales growth or inflation:
a) $228 million for energy efficiency.
b) $65.5 million for renewable energy.
c) $62.5 million for RD&D.
3)Provides the CEC at least $62.5 million per year to administer
PIER. Funds are allocated by the CEC according general
statutory guidelines and more specific CEC-developed
investment plans. PIER funds support investments in RD&D for
energy technologies that provide tangible benefits to the
utility customers who fund the program. Collection of
ratepayer funds for these and other purposes, and the CEC's
authority to spend the funds it administers, is authorized
until 2012.
4)Requires gas utilities to collect a natural gas surcharge from
customers and remit the money to the BOE. Requires natural
gas surcharge funds be used to fund low-income assistance,
energy efficiency and conservation activities, and public
interest RD&D.
FISCAL EFFECT : Unknown
COMMENTS :
Background. As part of California's experiment with electric
deregulation, AB 1890 (Brulte), Chapter 854, Statutes of 1996,
required ratepayers to fund a variety of system reliability,
in-state benefit and low-income customer programs at specified
levels from 1998 through 2001. This funding was intended to
ensure that these "public goods" programs continued (at least in
the short term) in the restructured electric industry.
Among the public goods programs established by AB 1890 was
public interest energy RD&D. Prior to awarding any of the money
collected from ratepayers, the CEC was required to submit
reports to the Legislature describing the programs it would
support and the levels of support those programs would receive.
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This original CEC investment plan was adopted in 1997 and has
been extended twice since. SB 1194 (Sher), Chapter 1050,
Statutes of 2000, extended the collection of a public goods
charge from ratepayers until 2012 and again required the CEC to
develop investment plans for renewable energy and public
interest RD&D. This bill creates a new RD&D program to succeed
PIER, contingent on enactment of PGC funding for this purpose,
which is in AB 724 (Bradford), pending in the Senate.
Prior to enactment of AB 1002, (Wright), Chapter 932, Statutes
of 2000, gas surcharge revenues used to fund public purpose
programs were collected and held by the gas utilities. AB 1002,
in part to ensure that customers of non-PUC regulated gas
pipeline companies paid their fair share toward the gas public
purpose programs, required all gas surcharge monies from all
companies to be remitted to the BOE. The BOE would then return
the funds to the gas companies to carry out the public purpose
programs. The 2010-11 Budget Act includes a transfer of $155
million from these natural gas surcharge funds to the General
Fund. The gas provisions of this bill return the handling of
gas surcharge funds by the utilities to the pre-AB 1002 process,
so the funds could not be appropriated to the General Fund. The
non-PUC regulated gas companies would still remit surcharge
revenues to the BOE.
Energy research may be defunded for six months or more. While
this bill provides that PGC funds collected before January 1,
2012, can be spent according to the existing PIER statutes, its
companion, AB 724 (Bradford) repeals the PIER fund and transfers
residual funds to a PIER "wrap up" account. Funds from this
account would not be available until an appropriation is enacted
by the Legislature, which may not be until the 2012-13 Budget
Act is enacted. Meanwhile, if AB 724 is enacted as currently
proposed, it would take effect immediately as an urgency
statute, defunding PIER projects and CEC staff until a new
appropriation is enacted.
Is the composition of the coordinating council appropriate for
CEIP's purpose? The council created by this bill has an
indeterminate number of members and no provision for appointment
of the non-governmental members other than self-selection. In
addition to the 27 members designated in the bill, the bill
gives a seat to any "participating" publicly-owned utility
(POU). The bill does not define "participate," so it's
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conceivable that any POU contributing funds, seeking awards, or
even just showing up to a meeting could appoint itself to the
council. There are about 45 electric POUs in California. It is
not clear how the council would make decisions, what authority
it has, or what authority the CEC has over it, but to the extent
the council would have any influence over the CEC's decisions
regarding expenditure of CEIP funds, it seems inappropriate that
it could be dominated by self-appointed utility representatives,
including POUs that don't even contribute funds to the program.
Why single out UC for bidding and contracting restrictions? The
author has cited high overhead and lack of transparency in the
contracting process with UC. However, the bill does not limit
overhead for UC or anyone else. Instead, the bill makes UC
subject to specific restrictions which may operate to favor
other research institutions or the private sector. The bill
prohibits the CEC from awarding CEIP funds to the UC through
either a sole source or interagency agreement if the funds could
be awarded through a competitive bid (including to another
entity). The bill suggests that the only way UC can get funds
through sole source or interagency agreement is if it is
impossible to award funds to UC or any other entity through
competitive bid. It's not clear that such a rigid preference
for competitive bid fits the type of research projects CEIP will
fund, or why the restrictions should apply only to UC and not to
other agencies, research institutions, and private sector
entities.
Analysis Prepared by : Lawrence Lingbloom / NAT. RES. / (916)
319-2092
FN: 0002825