BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | AB 327| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: AB 327 Author: Perea (D), et al. Amended: 9/3/13 in Senate Vote: 21 SENATE ENERGY, UTIL. & COMMUNIC. COMMITTEE : 10-0, 7/2/13 AYES: Padilla, Fuller, Corbett, De León, DeSaulnier, Hill, Knight, Pavley, Wolk, Wright NO VOTE RECORDED: Cannella SENATE APPROPRIATIONS COMMITTEE : 6-0, 8/30/13 AYES: De León, Gaines, Hill, Lara, Padilla, Steinberg NO VOTE RECORDED: Walters ASSEMBLY FLOOR : 66-4, 5/23/13 - See last page for vote SUBJECT : Electricity: natural gas: rates: net energy metering: California Renewables Portfolio Standard Program SOURCE : Author DIGEST : This bill restructures the rate design for residential electric customers, creates a new net energy metering (NEM) program, and specifies that the Public Utilities Commission (PUC) may require the procurement of eligible renewable energy resources in amounts greater than what is required in statute. ANALYSIS : CONTINUED AB 327 Page 2 Existing law: 1. States that PUC has regulatory authority over public utilities, including electrical and gas corporations, as defined 2. Authorizes the PUC to fix the rates and charges for every public utility, and requires that those rates and charges be just and reasonable. 3. Requires the PUC to designate a baseline quantity of electricity and gas necessary to supply a significant portion of the reasonable energy needs of the average residential customer and requires that electrical and gas corporations file rates and charges, to be approved by the PUC, providing baseline rates. 4. Requires the PUC, in establishing the baseline rates, to avoid excessive rate increases for residential customers. 5. Requires the PUC to establish a program of assistance to specified low-income electric and gas customers, referred to as the California Alternate Rates for Energy (CARE) program. 6. Prohibits the PUC from requiring or permitting an electrical corporation to do any of the following: A. Employ mandatory or default time-variant pricing, as defined, with or without bill protection, as defined, for residential customers prior to January 1, 2013. B. Employ mandatory or default time-variant pricing, without bill protection, for residential customers prior to January 1, 2014. C. Employ mandatory or default real-time pricing, without bill protection, for residential customers prior to January 1, 2020. 1. Authorizes the PUC to authorize an electrical corporation to offer residential customers the option of receiving service pursuant to time-variant pricing and to participate in other demand response programs and requires the PUC to only CONTINUED AB 327 Page 3 approve an electrical corporation's use of default time-variant pricing for residential customers, beginning January 1, 2014, if those residential customers have the option to not receive service pursuant to time-variant pricing and incur no additional charges, as specified, as a result of the exercise of that option. This bill: 1. Allows the PUC 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 PUC will be able to consider whether minimum bills are appropriate as a substitute for fixed charge. 2. Deletes the current restrictions on time-of-use (TOU) pricing and instead allows the PUC, beginning January 1, 2018, to require or authorize an investor-owned utility (IOU) to use default TOU pricing for residential customers. The TOU pricing will 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, will be exempt from any default TOU pricing. 3. Directs the PUC 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 will include any charges that are not paid by CARE customers such as payments to the California Solar Initiative (CSI) 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 CONTINUED AB 327 Page 4 "reasonable." 4. Specifies that the assessment of the needs of low-income electricity and gas customers be done at least every three years. 5. Explicitly allows the PUC to require the procurement of renewable energy resources in excess than the statutorily required amounts. 6. Provides that the PUC require every large electrical corporation to make the standard contract or tariff available to eligible customer-generators until the corporation reaches its NEM program limit, as specified, or July 1, 2017, whichever is earlier. Requires the corporation to file a monthly report with the PUC regarding its progress toward the NEM program limit. Specifies that the report include separate calculations on progress toward the limits based on operating solar energy systems, cumulative numbers of interconnection requests for NEM eligible systems, and any other PUC-required criteria. 7. Specifies the NEM cap for the large IOUs is 607 megawatts (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 PUC's current interpretation of the NEM cap defined as 5% of the utilities' aggregate customer peak demand. 8. Requires the PUC 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 PUC will 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. 9. Defines the term "referred resources" as distributed renewable generation resources, energy efficiency, energy storage, electric vehicles, and demand response technologies. CONTINUED AB 327 Page 5 10.Requires, no later than July 1, 2015, each electrical corporation to submit to the PUC a distribution resources plan proposal identifying optimal locations for the deployment of preferred resources, as follows: A. Evaluate locational benefits and costs of preferred resources located on the distribution system, as specified. B. Propose or identify standard tariffs, contracts, or other mechanisms for the deployment of cost-effective preferred resources that satisfy distribution planning objectives. C. Propose cost-effective methods of effectively coordinating existing PUC-approved programs, incentives, and tariffs to maximize the locational benefits and minimize the incremental costs of preferred resources. D. Identify any additional utility spending necessary to integrate cost-effective preferred resources into distribution planning consistent with the goal of yielding net benefits to ratepayers. 1. Requires the PUC to review each proposal submitted by an electrical corporation and approve, or modify and approve, a distribution resources plan for the corporation. Authorizes the PUC to modify any plan to minimize overall system costs and maximize ratepayer benefit from investments in preferred resources. 2. Provides that any electrical corporation spending on distribution infrastructure necessary to accomplish the distribution resources plan shall be prosed and considered as part of the next general rate case for the corporations. Authorizes the PUC to approve proposed spending and adopt criteria, benchmarks, and accountability mechanisms to evaluate the success of any investment authorized pursuant to a distribution resources plan. 3. Defines "large electrical corporation" as an electrical corporation with more than 100,000 service connections in California. CONTINUED AB 327 Page 6 4. Deletes existing law specifying that a fuel cell electrical generating facility is not eligible for the tariff unless it commences operation prior to January 1, 2015. Adds language providing that an electrical corporation customer with a fuel cell that has local air quality benefits is eligible for the tariff for a period of time to be determined by the PUC. 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 PUC. 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, Statutes of 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 PUC to establish the 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 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 CONTINUED AB 327 Page 7 at 2001 levels. TOU pricing . SB 695 also prohibited the PUC 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 PUC 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 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/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. RPS . RPS requires IOUs, electric service providers, and community choice aggregators to increase procurement from eligible renewable energy resources along a statutorily CONTINUED AB 327 Page 8 determined schedule. FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes Local: No According to the Senate Appropriations Committee: 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 rate payer should the PUC 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. SUPPORT : (per Senate Energy, Utilities and Communications Committee analysis of 7/2/13 - unable to reverify at time of writing) 100 Black Men of Long Beach, Inc. 1st Guaranty Mortgage and Realty Adelanto Chamber of Commerce Age Well Senior Services CONTINUED AB 327 Page 9 Alliance for Retail Energy Markets (if amended) American Family Housing Angel View, Inc. Antelope Valley Board of Trade Asian Americans for Community Involvement Asian Business Association Assured Coin and Loan Barstow Community Hospital Auxiliary Barstow Unified School District Border Transportation Council Building Industry Assn. of Fresno/Madera Counties Building Industry Association of the Greater Valley Business Resource Group C & C Development California Apartment Association California Asian Pacific Chamber of Commerce California Association of Community Managers California Biomass Energy Alliance California Black Chamber of Commerce California League of Food Processors California Manufacturers and Technology Association California Retailers Association California State Conference of the National Association for the Advancement of Colored People CAPC, Inc. Cathedral City Mayor, Kathleen J. DeRosa Central Valley Opportunity Center, Inc. Cities of Fabrick, Reedley, San Joaquin, and Selma City of Bakersfield Mayor, Harvey L. Hall City of Coalinga Mayor, Ron Lander City of El Cajon Councilmember, Gary Kendrick City of Encinitas Councilmember, Mark Muir City of Escondido Councilmember, Ed Gallo City of Escondido Mayor, Sam Abed City of Fresno Councilmember, Blong Xiong City of Fresno District 3 Councilmember, Oliver L. Baines III City of Huron Mayor, Sylvia V. Chavez City of La Mesa Councilmember, Ernest Ewin City of Livingston City Manager, Jose Antonio Ramirez City of Mendota Mayor, Robert Silva City of Merced Councilmember, Mike Murphy City of Oceanside Deputy Mayor, Jerome M. Kern City of Vista Councilmember, Cody Campbell Coalition of California Utility Employees CONTINUED AB 327 Page 10 Community Women of San Gabriel Valley Congress of California Seniors Cortes Communications, LLC. Costa Mesa Chamber of Commerce County of Tulare CTI Environmental, Inc. Cyber Risk Insurance Brokers Delhi Center Downtown Pomona Owners Association El Concilio - Council for the Spanish Speaking Energy Communications Corp. Escondido Mercado Business Association Filipino-American Chamber of Commerce of San Diego Focuscom, Inc. Fresno Barrios Unidos Fresno Metro Black Chamber of Commerce Gardena Valley Chamber of Commerce Gi & Associates GRCN Connecting Communities Greater Antelope Valley Association of REALTORS H.O.P.E. of the Mountain Empire Habitat for Humanity in San Diego County Hawthorne Chamber of Commerce Helpline Youth Counseling Hilltop Group, Inc. Hispanic Outreach Taskforce Independent Energy Producers Association Inland Valley Business Alliance International Brotherhood of Electrical Workers, Local 465 International Brotherhood of Electrical Workers, Local 47 International Brotherhood of Electrical Workers, Local 569 Kalusugan Community Services Kern Council of Governments Kern County Board of Supervisors Kern County District 5 Supervisor, Leticia Perez Kern County Taxpayers Association Kings County Board of Supervisors Kings County Economic Development Corp Lao American Coalition Ledford Enterprises LifeHouse Health Services Lumber Estimating Service MainStreetChamber Pancho Cucamonga/Upland Martinez Supply CONTINUED AB 327 Page 11 Meals On Wheels West Mercado Business Association Mountain Health and Community Services Operative Plasterers' and Cement Masons' International Association Orange County Hispanic Chamber Orange Senior Center Otay Mesa Chamber of Commerce Pacific Gas and Electric Company Q & A Insurance Compliance Specialist Sacramento Black Chamber of Commerce San Diego Gas and Electric San Diego Port Tenants Association San Diego Regional Minority Supplier Development Council San Luis Obispo County Builders Exchange San Mateo County Hispanic Chamber of Commerce San Ysidro Health Center Save Our Rural Economy Sempra Energy Utility Southern California Edison Stalwart Communications Sweetwater Authority Board Member, Jess Van Deventer The Center Long Beach Thomas W. Amend Drywall Contractor Trilogy PR Group Union of Pan Asian Communities United Association of Food Trucks of San Diego United Association of Plumbers and Steamfitters, Local 230 United Cambodian Community United Communities Network United States Green Chamber of Commerce Vista LifeHOUSE Western Region Asians in Teleco and Energy Whittier Uptown Association OPPOSITION : (per Senate Energy, Utilities and Communications Committee analysis of 7/2/13 - unable to reverify at time of writing) AARP California Division of Ratepayer Advocates Latin Business Association The Greenlining Institute The Utility Reform Network CONTINUED AB 327 Page 12 ASSEMBLY FLOOR : 66-4, 5/23/13 AYES: Achadjian, Alejo, Allen, Atkins, Bigelow, Bloom, Bocanegra, Bonilla, Bonta, Bradford, Brown, Buchanan, Ian Calderon, Campos, Chau, Chávez, Conway, Cooley, Dahle, Daly, Donnelly, Eggman, Fong, Fox, Frazier, Beth Gaines, Garcia, Gatto, Gomez, Gordon, Gorell, Gray, Hagman, Hall, Harkey, Roger Hernández, Jones-Sawyer, Linder, Logue, Lowenthal, Maienschein, Mansoor, Medina, Melendez, Mitchell, Morrell, Mullin, Nazarian, Nestande, Olsen, Pan, Patterson, Perea, V. Manuel Pérez, Quirk, Quirk-Silva, Rendon, Salas, Skinner, Ting, Wagner, Weber, Wieckowski, Wilk, Williams, John A. Pérez NOES: Ammiano, Blumenfield, Stone, Yamada NO VOTE RECORDED: Chesbro, Dickinson, Grove, Holden, Jones, Levine, Muratsuchi, Waldron, Vacancy, Vacancy JG:k 9/3/13 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END **** CONTINUED