BILL ANALYSIS Ó 1 SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE ALEX PADILLA, CHAIR AB 628 - Gorell & Hall Hearing Date: July 2, 2013 A As Amended: May 8, 2013 FISCAL B 6 2 8 DESCRIPTION Current law requires California's electric utilities to first meet their energy needs through cost effective energy efficiency measures. (Public Utilities Section 454.5) Current decisions of the California Public Utilities Commission (CPUC) require investor-owned utilities (IOUs) to administer energy efficiency programs in multi-year portfolios designed to meet pre-established energy savings goals which are funded by ratepayer charges, currently at about $1 billion per year. Current law establishes the Infrastructure and Economic Development Bank (IBank) to provide financing for economic development projects through both taxable and tax-exempt revenue bonds. Eligible projects promote both the economic development and conservation of natural resources for cities and counties. A range of entities are eligible to apply for funding through the IBank, including port and harbor districts, and private corporations. (Government Code 63000 et seq.) Current law directs the CPUC to authorize IOUs to engage in economic development programs and further permits the recovery of associated costs from ratepayers. (Public Utilities Code 740.4) Current law authorizes California Alternative Energy and Advanced Transportation Financing Authority (CAETFA) to issue bonds and fix fees, charges, and interest rates for loans in order to promote the creation of manufacturing, jobs, reduction of greenhouse gases, or reductions in air and water pollution or energy consumption. (Public Resources Codes 26011, 26011.8) This bill establishes a framework for the development of energy management plans between port and harbor districts and IOUs or publicly-owned utilities (POUs). The bill requires the plans to include assessments of current energy consumption, energy management issues, forecasts, domestic and international shipping requirements related to energy usage, measureable energy performance goals, recommendations for implementation, short and long-term objectives and authorizes utility ownership of alternative fuel vehicle infrastructure facilities. This bill mandates that the CPUC approve elements of the energy management plans that were jointly developed between a port or harbor district and an IOU including ownership of alternative fuel vehicle infrastructure facilities. The CPUC would also be required to provide expedited review of jointly developed energy management plans. This bill requires that energy management plans developed in cooperation between the port or harbor district and the utility be considered eligible for funding from the IBank, CAETFA, and utility ratepayers via the CPUC. BACKGROUND Energy Management Plans - Energy management plans are negotiated plans between utility customers, local authorities, and servicing utilities that outline a comprehensive assessment of energy usage. The plans consider energy consumption, energy efficiency measures, and infrastructure in order to determine a policy and set of actions to manage the demand for energy. The port of Los Angeles recently announced plans to cooperate with the Los Angeles Department of Water and Power (LADWP) to develop an Energy Management Action Plan. Energy management plans are not currently defined in statute; they are not explicitly authorized, nor are they prohibited. The At-Berth Regulations - The California Air Resources Board (CARB) has developed regulations commonly referred to as the At-berth Regulations for ships at California ports.<1> The regulations are being implemented in stages and began in 2010. By 2014, the CARB will require that 50% of visits by container and passenger ships be powered by on-shore power, or that ship operators alternatively reduce 50% of emissions associated with their ships at-berth. Ultimately these percentages will be increased to 80% by 2020. Previously, ships visiting ports would power themselves with on-board diesel generators, which are a significant cause of air pollutants in port and harbor districts. The CARB regulations are intended to improve the air quality of these ports, but in doing so will increase demand for electricity power from the local electric utility. The CARB identifies three types of incentives for compliance with the at-berth regulations: Emission credits that can be accumulated and used by fleets complying with the equivalent emissions reduction option; Proposition 1B (2006) funding available to reduce emissions from goods-movement activities; and Carl Moyer funding available to reduce emissions of diesel emissions. The California Infrastructure Bank - The IBank was created to promote the economic development of California cities and counties by providing funding options, including tax-exempt conduit bonds for projects that promote both economic development and resource conservation. The IBank may also issue loans directly to local governments, capped at $10 million per project. Private corporations and non-profit organizations may also qualify for certain funding opportunities. The IBank only issues tax-exempt bonds to entities with high credit ratings and the bonds are limited by federal tax code. There are multiple other entities that have financing options for infrastructure and economic development projects. These entities include local city and county governments, California Statewide Community Development Authority, the California Municipal Finance Authority, and the California Association for --------------------------- <1>See http://www.arb.ca.gov/ports/shorepower/shorepower.htm and http://wpci.iaphworldports.org/data/docs/onshore-power-supply/library/1266571852_shorepowerfactsheet.pdf Local Economic Development. CPUC proceedings - The CPUC currently requires IOUs to submit energy efficiency plans every two to three years for approval. The CPUC approves the budgets and goals of the energy efficiency plans, but does not review every element or specific project. The IOUs develop energy efficiency goals, approved by the CPUC, along with outreach plans for every class of ratepayers and also work with communities and large business sectors to develop energy management plans as called for in this bill. The CPUC may authorize ratepayer funding of projects that pass benefits to ratepayers including energy savings. Common energy efficiency projects include retrofits on lighting, heating and air conditioning systems, replacement windows, and insulation installation. COMMENTS 1. Author's Purpose . The author intends to permit port and harbor districts to work collaboratively with utilities and energy service companies to develop comprehensive energy management plans for the district. Participating entities would be eligible for financing options from the IBank, CAETFA, and from the CPUC. 2. Nothing New . Port and harbor districts, and any other utility customer, already have the ability to cooperate with local utilities and/or other entities in developing an energy management plan. In fact, the Port of Los Angeles recently began this process. Furthermore, ports, harbors, and even private companies are already eligible to apply to the IBank for financing. The IBank reports it has authority under current law to finance energy management plans for port districts. The IOUs regularly request approval of energy efficiency projects at the CPUC. It is not clear what financing option that this bill would authorize that is not already permissible. 3. Utility Ownership Mandate . Among the items listed in the proposed energy management plans are measures to be taken that may provide for replacement of vehicles with low-emission alternatives, development of infrastructure, and may include utility ownership or operation of those facilities. The CPUC previously denied utility ownership of natural gas refueling facilities.<2> These elements of the plan, combined with the mandate that the CPUC shall not limit the role of the IOUs in the developed plan would essentially mandate that the CPUC expand the role of the IOUs into the transportation market place, where they currently do not operate. In the past, the CPUC has been skeptical of attempts by the IOUs to expand their business into transportation infrastructure, citing concerns over monopolistic behavior. In November, 2011, Southern California Gas Company (SoCalGas) filed an application with the CPUC to offer a new tariff to meet natural gas compression needs of non-residential customers for end-use applications. The application stated that the company will not own, operate, or maintain facilities nor conduct business operations beyond the point of service delivery. The CPUC found that SoCalGas was not seeking to open retail natural gas vehicle refueling facilities, which it had previously ruled against. With this limitation, the CPUC authorized SoCalGas to file a Compression Services Tariff that offers compressed natural gas services to non-residential customers.<3> That ruling by the CPUC is currently being appealed. Clean Energy is a private firm that owns and operates natural gas refueling stations, and is a party in the appeal to CPUC Decision 12-12-037. Clean Energy argues that passing this bill could prejudice or interfere with the CPUC appeal process, and that the bill authorizes IOUs to expand into the transportation sector where private enterprises already operate. Another item included in the energy management plan is essentially an indefinite list of "other proposed actions and associated utility services." This item opens the door to any number of actions proposed by the utilities, and which the CPUC would be required to approve. To ensure that this bill does not mandate utility programs not reviewed and permitted by the CPUC, the committee may wish to consider striking the provisions for utility ownership of alternative fuel infrastructure facilities and the open ------------------------- <2> D.95-11-035 <3> D.12-12-037 ended list of other actions developed between the parties. 4. CPUC Authority . This bill appears to interfere with the CPUC process for approval of IOU budgets, goals, and activities. This process normally begins when the IOU files an application with the CPUC for a given project or a general rate case. The CPUC then holds an extensive review and vetting process that incorporates input from stakeholders including ratepayer advocacy groups. This bill would require the CPUC to provide an "expedited review" of energy management plans that were developed in cooperation with port and harbor districts. By expediting review ratepayer groups and other stakeholders would be limited in their ability to review and comment on the request. Expedited reviews would typically only be considered at the CPUC if there is urgency for the proceeding. This bill would also restrict the authority of the CPUC by stating that it shall not limit the role of the utilities in the developed energy management plans. The repercussions of this are not clear, and depend on the specifics of the energy management plan for each port or harbor district. The CPUC is responsible for regulating IOUs and has the expertise to determine if the electric or gas corporation has overstepped in its role in the energy management plan. This limitation mandates that the CPUC approve elements in the energy management plan, regardless of whether the plan's activities are appropriate for an IOU to provide and even if the CPUC had previously denied that authority to the IOUs. To ensure this bill does not limit the authority or duties of the CPUC, the committee may wish to consider an amendment that strikes subdivision (d) from the bill which provides for expedited plan review and restricts the ability to limit the IOU's role in plan activities. 5. Technical amendments: a. To ensure proper maintenance of the codes, move intent language in 25990 to an uncodified section. b. For consistency, strike "air pollution" on page 4, line 31, and insert "air emissions." c. At page 5, line 30, strike "63050" and insert "63000." ASSEMBLY VOTES Assembly Floor (77-0) Assembly Appropriations Committee (17-0) Assembly Jobs, Economic Development, and the Economy(9-0) Assembly Utilities and Commerce Committee (14-0) POSITIONS Sponsor: Southern California Gas Company Support: California Asian Pacific Chamber of Commerce California Manufacturers & Technology Association Chula Vista Chamber of Commerce Congress of California Seniors CONNECT El Monte/South El Monte Chamber of Commerce Jess Van Deventer, Sweetwater Authority Board Member Jim Unger, Hornblower Cruises & Events National City Chamber of Commerce Ron Morrison, National City Mayor San Diego Gas & Electric Company San Diego Port Tenants Association San Diego Regional Economic Development Corporation South County Economic Development Council 3 Individuals Oppose: Clean Energy Kyle Hiner AB 628 Analysis Hearing Date: July 2, 2013