BILL ANALYSIS                                                                                                                                                                                                    Ó          1





                SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
                                 ALEX PADILLA, CHAIR
          

          AB 1295 -  Hernández                              Hearing Date:   
          July 2, 2013               A
          As Amended:         June 25, 2013            FISCAL       B

                                                                        1
                                                                        2
                                                                        9
                                                                        5

                                      DESCRIPTION
           
           Current law  authorizes individual retail, non-residential,  
          end-use customers to acquire electric service from other  
          providers in each electrical corporation's (IOU) distribution  
          service territory, up to the historically highest amount of  
          kilowatt-hours (kWh) of annual sales for each utility.    
          Increases authorized in 2009 require a phase-in period for new  
          customer enrollments of not less than three years and not more  
          than five years.  The program is commonly referred to as "direct  
          access."  (Public Utilities Code 365 et seq.)

           Current law  establishes a general exception to the cap on direct  
          access for community choice aggregation (CCA) undertaken by  
          cities and counties serving their own residents and businesses,  
          with electricity secured from the market or energy producers  
          under contract with the CCA to provide service to IOU customers  
          choosing to enroll."  (Public Utilities Code 366.2)
            
           Current law  requires an electric service provider (ESP) that is  
          a non-utility entity that offers electric service to customers  
          within the service territory of an IOU to register with, and be  
          subject to, the jurisdiction of the CPUC.  The ESP is required  
          to undergo background checks and provide proof of financial  
          viability and technical and operational ability in addition to  
          other fees, bonds, and reporting requirements to the CPUC and to  
          the customer's served.  (Public Utilities Code 394 et seq.)

           This bill  requires IOUs to establish a program, by advice letter  
          or an application approved by the commission, under which the  
          customers of the state's IOUs can purchase generation directly  











          from a "community renewable facility" (facility) at a rate  
          determined between the facility and the customer.  The total  
          capacity cap of interconnected resources would be 600 MWs  
          allocated between the IOUs in proportion to the statewide peak  
          electricity demand and distributed over the life of six-year  
          program. 

           This bill  requires all IOUs operating in the state to:
           
                 Charge subscribing customers a community renewables  
               rate, in lieu of the generation rate normally charged to a  
               customer, which is equal to the customer's kilowatt hour  
               subscription with a facility times a rate that includes the  
               competitively bid contract price for renewable generation  
               and charges for departing load, renewable integration,  
               procurement of sufficient resources to adequately serve  
               subscribing customers, and program administration while  
               ensuring that non-subscribing customers are  unaffected; 
                 Continue to charge subscribing customers for all  
               transmission, distribution, and public purpose programs;
                 Purchase the unsubscribed output of any facility at the  
               competitively bid contract price for renewable generation;
                 Recover from a facility any procurement costs above  
               those that would otherwise be incurred under the RPS  
               program;
                 Pay any facility for any unsubscribed output  from the  
               facility at the original RPS contract price; and
                 Subtract from its retail sales the amount of generation  
               a customer subscribes to from a facility thereby reducing  
               the denominator in the calculation used to determine the  
               IOU's RPS procurement obligations.

           This bill  permits any customer of any IOU to subscribe for  
          generation from a facility if the facility:

                 Has contracted with the IOU to deliver renewable  
               generation under a competitively bid program and has  
               elected to become a community renewable facility;
                 Is an eligible renewable resource that comes begins  
               commercial operation on or after January 1, 2012;
                 Is less than 20 MW in size; and
                 Is located in the service territory of the IOU and its  
               customer and optimizes the delivery of electricity by the  
               facility to load centers.











           This bill  requires the CPUC to:

                 Authorize the tariff required by the program;
                 Ensure that customers that do not subscribe in the  
               community renewables option are indifferent to whether  
               other customers subscribe in the community renewables  
               option, and no costs are shifted from subscribing customers  
               to non-subscribing customers;
                 Evaluate the program after January 1, 2016 and consider  
               whether it should continue; and
                 Terminate the program by January 1, 2020.

           This bill  permits a POU which offers a community renewable  
          option to reduce its obligation to offer a feed-in-tariff in its  
          territory under current law.

                                      BACKGROUND
           
          Deregulation - California's experiment with deregulation was  
          launched in 1996 when the Legislature passed AB 1890 (Brulte,  
          1996), to restructure the electric industry. One of the key  
          features of electrical restructuring was the authorization of  
          retail competition within IOU service areas. AB 1890 ended the  
          service monopoly of utilities and authorized retail customers to  
          purchase energy directly from suppliers. These transactions are  
          known as "direct access." Community aggregation is a form of  
          direct access where, for example, a city may act as a purchasing  
          agent on behalf of its residents. 

          Before the energy crisis in 2001, non-IOU providers (direct  
          access providers) had enrolled customers but then failed to  
          provide the power ordered.  The customers returned to the IOUs  
          for service but the utilities did not have the electric  
          generation resources to serve those customers because they had  
          left IOU service.  In response a comprehensive framework has  
          been developed by the Legislature and the CPUC to ensure that,  
          in the case of direct transactions between energy suppliers and  
          utility customers, sufficient electric resources are maintained  
          to serve all customers, that IOU customers not served by  
          independent suppliers are held indifferent as to the cost  
          impacts of those transactions, and that the grid is reliable.

          Post Deregulation - Two programs remain available for electric  










          customers to secure power from an entity other than an IOU -  
          Direct Access and Community Choice Aggregation.  It is critical  
          to note that under these programs the utility is ultimately and  
          always responsible for providing electricity to every customer  
          in its service territory if the customer changes his/her mind or  
          the alternative avenue of purchase used by the customer  
          terminates or fails to provide service.  Consequently both the  
          CCA and DA programs have been subject to years of painstaking  
          review, analysis, and litigation at the CPUC to try to provide a  
          framework under which these alternative mechanisms can operate  
          and the remaining ratepayers of the IOU are held indifferent as  
          to the financial impacts of the departing load. 

          As a result all customers participating in CCAs pay a customer  
          reliability surcharge; all direct access customers pay a power  
          charge indifference amount.

          IOU "Green Options" - In response to the increasing attention of  
          the Legislature to institute enhanced renewable purchase options  
          for electric ratepayers, the three largest IOUs have programs at  
          varying stages of development to provide customers with greater  
          access to renewable electricity or renewable energy credits.   
          San Diego Gas & Electric (SDG&E) and Pacific Gas & Electric  
          (PG&E) have each have filed applications with the CPUC.  Edison  
          plans to do so later this year.

                PG&E  - In April 2012 PG&E requested authority from the CPUC  
               to establish "Green Option" available to all bundled  
               electricity customers under which customers could  
               voluntarily choose to pay a rate to purchase Green-e Energy  
               certified renewable energy credits ("RECs") for a premium  
               on their utility bill.  A heavy amount of criticism was  
               levied against the program.  There was no evidence that the  
               REC purchases would result in any additional renewable  
               generation since they would be purchased from existing  
               in-state solar generators and from wind projects located  
               elsewhere in the west.  It was argued that the plan would  
               not stimulate new development, or that these purchases  
               would cause any existing project to generate renewable  
               electricity that would not have otherwise been produced  
               and, in short, make no difference.  Customers who  
               subscribed based on the belief that they would cause a net  
               increase in renewable power production would, in fact, be  
               misinformed. 











               The parties in the proceeding (including TURN and the  
               Sierra Club) negotiated a settlement agreement with PG&E  
               which was filed in early April to allow PG&E's residential  
               and commercial customers to voluntarily elect to purchase  
               renewable power to satisfy up to 100% of their electrical  
               demand. Under the program, PG&E will execute contracts for  
               new renewable generation from facilities to be built within  
               the PG&E service territory sufficient to serve the  
               electrical demand of customers participating in the  
               program. The amount paid by participating PG&E customers  
               will be based on the actual cost of procuring new renewable  
               generation, thereby providing them with a fair price and a  
               long-term hedge against rising conventional supply costs.  
               Non-participating customers will pay no portion of the  
               costs of the program.  The agreement is pending review by  
               the CPUC.

                SDG&E  - In January 2012, SDG&E requested authority from the  
               CPUC to launch a pilot program with two elements designed  
               to gauge the level of interest among customers for whom  
               rooftop solar may not be a viable option.  Its Share the  
               Sun? proposal would make up to 10 megawatts (MW) of solar  
               power available from projects owned by solar developers.   
               Customers could acquire a portion of the power produced by  
               a solar-energy system in SDG&E's service area to cover all  
               or part of their electricity use and receive a bill credit  
               for the value of the solar power their portion generates.   
               The "green attributes" of the solar power would belong to  
               the customer and would not be applied toward SDG&E's  
               renewable portfolio goals.  However, SDG&E would take  
               delivery of all the energy from these projects, and any  
               unsubscribed energy will be added to SDG&E's renewable  
               portfolio, but will be over and above what is procured to  
               meet the 33 percent renewables target.  The second phase of  
               the program would initiate the "SunRate" in which customers  
               could have their energy supplied from local solar projects  
               already under contract to SDG&E.  As much as 10 MW would be  
               available under this "green" rate.  Customers would buy the  
               solar energy from SDG&E to cover 50 percent, 75 percent, or  
               all of their energy use.  The price will be based on the  
               cost of the solar energy from the local solar projects. 

                Edison  - Is running different models and expects to file an  










               application for a green option with the CPUC later this  
               year.  

                                       COMMENTS
           
              1.   Author's Purpose  .  California electricity customers have  
               shown a desire to source a greater amount of their personal  
               electricity consumption from renewable energy sources.  
               While California electric utilities continue to invest in  
               utility-scale renewables, many customers are unable to  
               participate in the customer-side renewable energy  
               experience; this may be because they do not own property,  
               do not have sufficient upfront funds, or do not have an  
               optimally-sited roof in order to install their own solar  
               systems. A solution to this problem is a community  
               renewables program, which would allow an electricity  
               customer to source a greater proportion of their  
               electricity from renewable energy resources by subscribing  
               to the output of a third party renewable energy facility,  
               with that subscription accounted for on the customer's  
               electricity bill.

              2.   It's Not Easy Being Green .  There has been great  
               interest in the Legislature to establish an option for  
               customers to purchase renewable generation who are  
               precluded from self-generation through programs such as  
               rooftop solar due to finances, shade, or because they are  
               apartment dwelllers and/or renters without the space or  
               authority to install generation.  Debate has centered on  
               three critical elements to ensure that the costs of being  
               green are not shifted to non-subscribing customers, there  
               are no adverse impacts to grid reliability, and that there  
               is ease of program administration for the CPUC and IOUs.

               After extensive amendments those goals were achieved in SB  
               43 (Wolk) which the Senate adopted in May.  After further  
               debate and refinements the Assembly Utilities & Commerce  
               Committee approved SB 43 on June 24th.  After three years  
               of debate and several bills, there appears to be great  
               support for SB 43 and little or no opposition.  However, AB  
               1295 proposes a different financing model, would result in  
               two separately administered program structures adding  
               greater complexity to CPUC and IOU administration, and  
               double the capacity of generation available for direct  










               purchase by customers in a model that has yet to be tested  
               for impacts.

               The specific framework in this bill also lacks key elements  
               that are in SB 43 including a set-aside strictly for  
               residential customers coupled with an enrollment cap per  
               customer to ensure that just a few large customers don't  
               dominate the program's available capacity and accommodation  
               of pending applications under review by the CPUC for IOU  
               programs in the territories of SDG&E and PG&E.  This model  
               also permits the subscriber to pay additional costs for  
               renewable generation directly to the facility which would  
               be on top of the contract rate and market rate for  
               renewable generation.  Most significantly this bill ties  
               the hands of the CPUC in considering where cost shifts  
               occur in the program structure and actually goes in the  
               opposite direction by mandating charges on subscribing  
               customers that may not be justified.

              3.   Charges to Subscribers Appear Excessive  .  Under this  
               bill IOUs would be mandated to charge subscribing customers  
               for several explicit costs including those for departing  
               load whether applicable or not. The CPUC should make those  
               determinations and not presuppose that they are applicable  
               to this new program model.  Departing load charges are  
               applied to customers in direct access and community choice  
               aggregation programs but those programs differ  
               significantly because the generation facilities have no  
               contractual relationship with the IOUs.  When a customer  
               enrolls in those programs, they truly depart from IOU  
               service for generation.  In AB 1295 the IOU has a contract  
               with the facility and has an obligation to purchase  
               electricity from that facility regardless of whether the  
               customer stays enrolled in the program and the facility  
               will be used to serve IOU customers regardless of the  
               subscriptions.

              4.   RPS Impacts  .  Concern has been expressed by renewable  
               developers that this bill could "double-count" renewables  
               under this program and the RPS program and therefore not be  
               incremental or additive to the RPS.  This does not appear  
               to the case.  If a customer subscribes to the community  
               renewables program, then the IOU would no longer be selling  
               them electricity and so that subscription amount would  










               reduce the denominator for the IOU when calculating the  
               retail sales for its RPS requirement.  If the customer  
               terminates their subscription then they would come back to  
               IOU service and their electrical load would be added back  
               to the IOU's RPS denominator.  At that point the IOU also  
               has to buy the renewable output from the facility and can  
               then, and only then, count that generation toward its RPS  
               obligation.  However, if the facility can't attract  
               subscribers, then the program MWs would no longer be  
               incremental to the RPS but would be part of the IOU's RPS  
               portfolio.  

               There does not appear to be double-counting but there is a  
               renewable shuffle authorized that could leave a hole in an  
               IOU's RPS procurements.  Until the tariff permitted by this  
               bill is available to customers, any renewable facility that  
               is less than 20 MWs and has a PPA with an IOU could make an  
               election that all or a portion of its renewable generation  
               is for community renewables.  That would allow customers  
               the green option but it would reduce the eligible  
               procurement in the IOU's RPS portfolio potentially leaving  
               them short of their compliance obligation.   And why  
               shouldn't the facility try to enroll subscribers?  The IOU  
               must buy the power regardless of subscriptions and the  
               facility could continue to get the contract rate for  
               generation as well as raise additional revenue through  
               direct charges to subscribers.  

              5.   Inequity Between POUs & IOUs  .  This bill allows POUs to  
               offset the statutory feed-in-tariff obligations for  
               renewable generation less than three megawatts in size if  
               those projects are for a community renewable tariff.  As a  
               result POU programs would not be incremental to the RPS  
               obligations and a mandate for the program would only exist  
               for IOUs.  This creates a program inequity for POU  
               customers since the program would be optional in POU  
               territories and where utilized establish uneven renewable  
               program requirements for POUs and IOUs.  

              6.   Related Legislation  .  Each of these bills proposes (or  
               proposed) green tariff shared renewable programs for the  
               customers of the three largest IOUs:

                     AB 1014 (Williams, 2013) held in Senate Rules  










                 Committee;
                     SB 43 (Wolk, 2013) passed Assembly Utilities &  
                 Commerce Committee June 24, 2013;
                     SB 843 (Wolk, 2012) failed passage in the Assembly  
                 Utilities & Commerce Committee August 30, 2012; and
                     SB 383 (Wolk) held in Senate Appropriations  
                 Committee, May, 2011 (bill later amended to address an  
                 unrelated issue).

                                    ASSEMBLY VOTES
           
          Assembly Floor                     (72-3)
          Assembly Appropriations Committee  (17-0)
          Assembly Utilities and Commerce Committee                       
          (14-0)

                                       POSITIONS
           
           Sponsor:
           
          Southern California Edison

           



          Support:
           
          None on file

           Concerns:

           Pacific Power

           Oppose:

           California Wind Energy
          Cascade Hydro, LLC
          CleanPath Ventures
          Environment California
          Green Sanctuary Committee of the UU Church of Davis
          Large-Scale Solar Association
          Solar Advocate
          SolarCity, unless amended










          Solar Energy Industries Association
          Sullivan Solar Power
          The Utility Reform Network
          The Vote Solar Initiative


          



















          Kellie Smith 
          AB 1295 Analysis
          Hearing Date:  July 2, 2013