BILL ANALYSIS Ó
Senate Appropriations Committee Fiscal Summary
Senator Kevin de León, Chair
AB 327 (Perea) - Electricity: natural gas: rates: net energy
metering: California Renewables Portfolio Standard Program.
Amended: August 21, 2013 Policy Vote: EU&C 10-1
Urgency: No Mandate: Yes (see staff comment)
Hearing Date: August 26, 2013 Consultant:
Marie Liu
SUSPENSE FILE. AS PROPOSED TO BE AMENDED.
Bill Summary: AB 327 would restructure the rate design for
residential electric customers, create a new net energy metering
program, and specify that California Public Utilities Commission
(CPUC) may require the procurement of eligible renewable energy
resources in amounts greater than what is required in statute.
Fiscal Impact (as proposed to be amended):
Annual costs of approximately $116,000 from the Public
Utilities Reimbursement Account (special) for the workload
involved in conducting a triennial assessment of the needs
of low-income electricity and gas customers.
Cost pressures in the millions to tens of millions of
dollars to the General Fund and various special funds to the
state as a ratepayer should the CPUC exercise the authority
in this bill to raise renewable energy procurement
requirements.
One-time costs of at least $120,000 from the Public
Utilities Reimbursement Account for the development of a new
NEM standard contact and tariff, a transition period for
existing NEM customers, and the eligible period for a
fuel-cell standard tariff.
One-time costs of at least $120,000 and ongoing costs of up
to $120,000 from the Public Utilities Reimbursement Account
to review distribution resource plans and to establish
criteria on evaluating the success of investments made
pursuant to such a plan.
Cost pressures in the hundreds of thousands of dollars to
the General Fund and various special funds to the state as a
ratepayer to the extent that the distribution resources plan
proposals lead to necessary infrastructure spending that
will be paid by the ratepayers.
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Background: Residential Electric Rates - Residential electric
rates in the territories of the three largest electric
corporations are generally designed in a four or five-tiered
structure based on the customer's quantity of electricity usage.
Within prescribed usage tiers, the amount of electricity
consumed is priced at increasing per-unit rates. Tier 1 is
baseline usage and tier 2 is 130% of baseline.
In response to the energy crisis, the Legislature froze rates
for tiers 1 and 2 in 2001. While rates to customers were frozen,
utilities continued to experience increased costs for
generation, distribution, transmission and new programs created
by the Legislature and the CPUC. These costs have been
disproportionally borne by customers whose electricity usage
falls in the upper tiers (3, 4, and 5). In 2009, the Legislature
passed SB 695 (Kehoe) Chapter 337/2009, which allowed the tiers
1 and 2 rates to gradually increase until 2018 at which time the
freeze would be completely lifted. These rate adjustments,
overall, were revenue neutral to the IOUs as increases in tiers
1 and 2 resulted in commensurate decreases in rate for tiers 3,
4, and 5.
CARE Program- Existing law requires the California Public
Utilities Commission (CPUC) to establish the California
Alternative Rates for Energy or CARE program, which provides
assistance to low-income electric and gas customers with annual
household incomes less than 200% of federal poverty guideline
levels. The cost of this program is spread across multiple
classes of customers. CARE rates cannot exceed 80% of rates for
non-CARE residential customer and is exempted from certain
charges, including the charge to support CARE and the California
Solar Initiative (CSI). CARE rates were also frozen in response
to the energy crisis, but SB 695 allowed the rates to be
increased at the same rate as increases in benefits under
CalWorks, not to exceed 3% through 2018. However, due to budget
impacts on the CalWorks program, there have been no increases in
benefits, thus effectively maintaining the freeze of CARE rates
at 2001 levels.
Existing law requires the CPUC to conduct an assessment of the
needs of low-income electricity and gas ratepayers with the
assistance of the Low-Income Oversight Board beginning in 2002.
To date, the CPUC has done conducted a comprehensive assessment
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twice and a narrowly targeted assessment once.
Time-of-use (TOU) pricing - SB 695 also prohibited the CPUC from
permitting a utility to employ mandatory or default TOU pricing
for any residential customer prior to January 1, 2014. However,
mandatory or default TOU pricing can be authorized as early as
January 1, 2013 if the utility caps the customer's bill at the
level it would have been had the customer not changed his rate
schedule to TOU pricing. Mandatory or default real-time pricing
may be permitted as early as January 1, 2020. Beginning January
1, 2014, the CPUC may approve TOU pricing in a manner consistent
with the Public Utilities Act if the customer has the option not
to be subject to TOU pricing and that option can be exercised
without charge.
Net metering - Existing law requires electric utilities to
credit all electricity generated by a customer-owned renewable
energy system against the customer's usage of electricity sold
by the utility, a procedure known as "net energy metering"
(NEM). Under the CSI, customers who install solar system receive
"full retail NEM" where the customer is exempt from paying
transmission and distribution costs on electricity provided by
the utility (the electricity from the grid that the customer
uses when his or her solar panels are not producing, like at
night). Every electric utility is required to develop a NEM
tariff to provide for net energy metering, which is available to
customers on a first-come-first-serve basis until the total
generating capacity exceeds five percent of the utilities'
aggregate customer peak demand.
As transmission and distribution costs are typically one-half to
two-thirds of a residential customer's billing, full retail NEM
offers a substantial subsidy to NEM customers with the costs
being shifted to non-NEM customers. Given that rooftop solar now
generates 1,173MW in the IOU territories, the cost of full
retail NEM comes at a cost of approximately $60 million to
non-NEM customers across the state. The Legislature has in the
past justified this subsidy as it stimulates the solar industry,
helps the state reach its renewable energy goals, and provides
other external benefits.
Renewable Portfolio Standard - California's Renewable Portfolio
Standard (RPS) requires investor-owned utilities (IOUs),
electric service providers, and community choice aggregators to
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increase procurement from eligible renewable energy resources
along a statutorily determined schedule.
Proposed Law: Regarding residential rate design - This bill
would delete all existing restrictions on rate increases.
This bill would allow the CPUC to adopt a fixed charge up to $10
per month or $5 per month for CARE customers for the purpose of
collecting a reasonable portion of the fixed costs of providing
residential electric service. The fixed charge must reasonably
reflect the different costs of serving small and large
customers, not unreasonably impair conservation and energy
efficiency incentives, and not overburden low-income customers.
Beginning January 1, 2016, the maximum fixed charge may be
adjusted annually to the Consumer Price Index. The CPUC would be
able to consider whether minimum bills are appropriate as a
substitute for fixed charge.
This bill would delete the current restrictions on TOU pricing
and instead allow the CPUC, beginning January 1, 2018, to
require or authorize an IOU to use default time-of-use pricing
for residential customers. The TOU pricing would be subject to
specified conditions, including that it not cause unreasonable
hardship for senior citizens or economically vulnerable
customers in hot climate zones, that the customer be provided
with interval usage data before being subject to the TOU rates,
and that residential customers have the option to not receive
TOU rates without being subject to additional charges. Certain
residential customers, such as those receiving a medical
baseline allowance, would be exempt from any default time-of-use
pricing.
This bill would direct the CPUC to establish rates for the CARE
program and delete the existing requirements on the CARE tiers
and rate increase limitations. For customers of the large IOUs,
the set rates must effectively give a discount between 30% and
35% to eligible customers. The discount would include any
charges that are not paid by CARE customers such as payments to
the California Solar Initiative and any discount in a fixed
charge. If an IOU is currently providing a benefit greater than
35%, it cannot reduce that benefit more than is "reasonable."
This bill would specify that the assessment of the needs of
low-income electricity and gas customers be done at least every
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three years.
Regarding RPS - This bill would explicitly allow the CPUC to
require the procurement of renewable energy resources in excess
than the statutorily required amounts.
Regarding Net Metering - This bill would specify the NEM cap for
the large IOUs is 607 MW for customers of San Diego Gas and
Electric Company, 2,240 MW for Southern California Edison
customers, and 2,409 MW for Pacific Gas and Electric customers.
This provision codifies the CPUC's current interpretation of the
NEM cap defined as five percent of the utilities' aggregate
customer peak demand.
The CPUC would be required to develop a new standard contract or
tariff for new NEM customers of the large IOUs by July 1, 2015
that must be used beginning January 1, 2017 or earlier if the
NEM cap has been reached. The CPUC would be required to ensure
that the new standard contract or tariff for rates, terms of
service, and billing rules is based on the electrical system
costs and benefits received by nonparticipating customers and
prevents a cost shift to non-NEM customers.
Existing NEM customers may continue to receive service under the
existing tariff until December 31, 2020, though the tariff
cannot be transferred with a change in customer or ownership of
the renewable electrical generation facility after January 1,
2017.
Staff Comments: Regarding residential rate design - In 2012, the
CPUC opened a proceeding in response to SB 695 to examine
current residential electric rate design to identify a system
that is both equitable and affordable for the foreseeable
future. The proceeding is examining whether the current rate
structure is meeting the CPUC's five guiding principles on rate
design that rates should:
(1) Be based on marginal cost,
(2) Be based on cost-causation principles,
(3) Encourage conservation and reduce peak demand,
(4) Provide stability, simplicity, and customer
service, and
(5) Encourage economically efficient
decision-making.
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The scope of this proceeding largely, if not entirely,
encompasses the changes to residential rate design required by
this bill. As such, the costs of enacting the residential rate
design portions of the bill are absorbable into the CPUC's
existing activities. As these rate design changes only affect
residential customers, this portion of the bill does not affect
the state as a ratepayer.
This bill would establish a minimum frequency in which the CPUC
would have to complete a needs assessment of low-income
electricity and gas customers. By specifying a frequency, the
CPUC will likely need one dedicated PY for this responsibility
at a cost of $116,000 annually.
Regarding RPS - This bill does not in it of itself increase the
procurement requirements of renewable energy resources. However,
it does make it explicit that the CPUC can increase the RPS
requirements without Legislation. Should the CPUC exercise this
ability, there would be costs to the state as an electric
customer. Both the Public Utilities Commission and the Air
Resources Board have conducted studies on the ratepayer impacts
of various 33 percent Renewables Portfolio Standard scenarios.
According to those studies, in 2020, average retail electricity
rates (in current dollars) are projected to be between $0.006
and $0.011 per kilowatt-hour higher than they otherwise would be
under current law (including the existing 20 percent Renewables
Portfolio Standard). The cost to the state would depend on the
amount which the CPUC increases the procurement requirements and
on what schedule, but could total in the millions and tens of
millions of dollars.
Regarding Net Metering -This bill would require the CPUC to
develop a new standard contract or tariff for NEM that prevents
a cost shift to non-NEM customers. This requirement will require
a proceeding to be conducted at a one-time cost of at least
$120,000.
Regarding the bill's state mandate - This bill would impose a
state mandate on publicly owned utilities, which are local
government agencies. However, because publicly owned utilities
are able to pass any implementation costs along to their
customers, the bill does not impose a reimbursable state
mandate.
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This bill would also impose a state mandate by changing the
definition of a crime as any violation of the Public Utilities
Act or any order, decision, rule, or requirement of the CPUC is
a crime. This bill does both. However, these costs are not
reimbursable.
Proposed Author Amendments: Amends would:
Regarding distribution resources:
Require IOUs to submit to the CPUC a distribution resources
plan proposal to identify optimal locations for the deployment
of preferred resources and specify information that must be
included in that proposal. Any necessary spending on
distribution infrastructure to accomplish the distribution
resources plan shall be considered as part of the next general
rate case for that IOU.
Require the CPUC to review and consider approval of each
distribution resources plan proposal
Require the CPUC to adopt criteria to evaluate the success of
any investment made pursuant to a distribution resources plan.
Regarding net metering:
Codifies the method on which "aggregate customer peak demand"
is to be calculated for the purpose of determining an IOU's
NEM program cap and specifies that the MW caps in the bill are
minimum caps under this calculation.
Require that the CPUC develop a new standard contract or
tariff for new NEM customers by December 31, 2015 (instead of
July 1, 2015).
Expand the requirements for the new NEM program including
requiring that the new standard contract or tariff must allow
projects to be built to the size of the onsite load, even if
it is greater than one MW, if there is not a significant
impact on the distribution grid and the project is subject to
reasonable interconnection charges under the CPUC's rules.
Instead of grandfathering existing NEM customers until
December 31, 2020, allow the CPUC to establish the transition
period. The CPUC would be required to consider a reasonable
expected payback period.
Explicitly prohibit a limitation on the amount of generating
capacity or the number of customer-generators eligible for the
new standard contract or tariff after July 1, 2017.
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Regarding fuel-cells :
Delete the January 1, 2015 sunset date on existing law that
requires IOUs to offer a standard tariff for net energy
metering for eligible fuel cell customer-generators
(gen-to-gen NEM) that is currently being used by fuel cells
powered by natural gas.
Allow the fuel cell customer-generator to be eligible for the
tariff for a period of time determined by the CPUC,