BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                            



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          |SENATE RULES COMMITTEE            |                        AB 327|
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                                    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  :    
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          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  

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             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  

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             "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.


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           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.


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           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  

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          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  

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          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

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          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

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          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

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          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

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           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

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