BILL ANALYSIS                                                                                                                                                                                                    




                                                                  AB 1763
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          Date of Hearing:   April 21, 2014

                    ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
                               Steven Bradford, Chair
                    AB 1763 (Perea) - As Amended:  March 28, 2014
           
          SUBJECT  :   State Energy Plan for 2030 and 2050

           SUMMARY  :   This bill requires the California Energy Commission  
          (CEC) to prepare a report containing a state energy plan for  
          2030 and 2050. Specifically,  this bill  :  

          1)Requires the CEC to prepare a report to the Governor and  
            Legislature by January 1, 2016, in consultation with the  
            California Independent System Operator, other relevant state  
            and local agencies, and interested stakeholders, in an open  
            and public process, containing a state energy plan for 2030  
            and 2050 that promotes economic growth, ensures reliable and  
            affordable energy supplies, and positions the state as a  
            leader in the United States and world energy markets.

          2)Requires the CEC to consider all of the following:

             a)   Energy forecasts based upon California's current and  
               future energy supply mix forecast to 2030 and 2050.
             b)   An analysis of California's energy infrastructure needs,  
               including a review of current and new infrastructure needed  
               for an evolving supply mix forecast to 2030 and 2050.
             c)   Recommendations on ensuring long-term energy supply  
               reliability and affordability through 2030 and 2050.

          1)States that, for purposes of this report, "energy" means  
            electricity, natural gas, and transportation fuels that are  
            used for powering homes, businesses, motor vehicles, and  
            aircraft in the state.

          2)States that the report is intended to assist in establishing  
            state policy and does not independently change any statute,  
            regulation, or regulatory decision.

          3)Sunsets the statute on January 1, 2020.

           EXISTING LAW   

          a)Requires the CEC to conduct assessments and forecasts of all  









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            aspects of energy industry supply, production, transportation,  
            delivery and distribution, demand, and prices at least every  
            two years. (Public Resources Code 25301)

          b)Requires the CEC to adopt an integrated energy policy report  
            every odd-numbered year, including an overview of major energy  
            trends and issues facing the state, including, but not limited  
            to, supply, demand, pricing, reliability, efficiency, and  
            impacts on public health and safety, the economy, resources,  
            and the environment. (Public Resources Code 25302(a))

          c)Requires the CEC to prepare an update to the integrated energy  
            policy report every even-numbered year. (Public Resources Code  
            25302(d))

          d)Requires the CEC to conduct workshops, hearings, and other  
            forums to gain the perspectives of the public and market  
            participants for purposes of the integrated energy policy  
            report (Public Resources Code 25306)

           FISCAL EFFECT  :   Unknown

           COMMENTS  :   

           1)Author's Statement.  "Over the last fifteen years we have seen  
            major changes to California's energy system. We have the most  
            progressive energy policies in the nation and have implemented  
            some of the most innovative environmental programs to help  
            curb carbon emissions and improve air quality. 

            "However, to stay on the forefront of energy policy, we must  
            have a focused energy plan to guide our policy-making moving  
            forward. AB 1763 would require the creation of a plan that  
            will consider California's current and future energy supply  
            mix, infrastructure needs, and include recommendations to  
            ensure long-term supply reliability and affordability through  
            2030 and 2050. 

            "Balancing our current policies with our long-term needs and  
            ensuring all Californians, especially those in our  
            disadvantaged communities, have access to an affordable and  
            reliable energy supply will be a key component of this plan.   
            AB 1763 would not change any existing policy or regulation  
            currently in place, but would build from our current  
            understanding of energy policy to create a strategic energy  









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            plan for the future."

           2)State Lacks Overarching Energy Plan  . In 2013, the Little  
            Hoover Commission issued a report titled: Rewiring California:  
            Integrating Agendas for Energy Reforms. The key findings of  
            the report are:

             a)   "In a short period, the state has adopted a series of  
               transformative policy initiatives, any of which taken  
               individually would take years of careful planning to  
               implement. The policies were adopted one at a time without  
               the benefit of a cohesive design. Now they are being  
               implemented simultaneously without an overarching plan."
             b)   "The state has not produced a comprehensive assessment  
               of the total cost of implementing this group of policies,  
               inhibiting consumers and businesses in their ability to  
               plan for this new future."
             c)   "The state lacks the ability to impose order on the  
               multitude of proceedings that determine how these policies  
               unfold, order which is essential to ensuring the state  
               maximizes progress toward each of its policies goals."

            According to a recent report by the National Association of  
            State Energy Officials (NASEO)<1> 

               "Although statewide energy plans differ in everything from  
               their general format to their goals and recommendations,  
               they all serve as a roadmap for achieving a prosperous and  
               secure energy future. Achieving such a vision is beneficial  
               for both the public and private sectors.

               "Though many states have tasked the State Energy Offices as  
               the lead organizing and authoring agencies, most state  
               energy plans are produced through extensive stakeholder  
               engagement processes involving other state agencies,  
               private sector interests, and input from the general  
               public. Also, although the emphasis on development of  
               energy resources within the state varies, the majority of  
               plans stress the development of a diversified energy  
               portfolio to meet the states' economic, environmental, and  
               security objectives. State energy plans provide an  
               assessment of current and future energy supply and demand,  
               examine existing energy policies, identify emerging energy  


               -------------------------
          <1> An Overview of Statewide Comprehensive Energy Plans From  
          2002 to 2011, NASEO, July 2013








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               challenges and opportunities, encourage economic  
               development, and promote the wise use of resources."

           1)Recent Assessment for Californians for Affordable Energy  
            (CARE).  An August 2013 study by Navigant Consulting,  
            commissioned by CARE, states that 

            "Regulatory requirements to lower the carbon intensity of  
            fuels in California will also introduce uncertainties  
            associated with additional costs in the production of  
            transportation fuels, as well as the associated costs of  
            infrastructure development and/or modifications needed for  
            compliance. Specifically, there are substantial levels of  
            uncertainties associated with: 
                 The ability of industry to significantly reduce the  
               carbon intensity ("CI") values of alternative fuels, and to  
               produce, distribute, and dispense them at an adequate  
               retail scale to support compliance consistent with the  
               current Low Carbon Fuel Standard ("LCFS") compliance  
               schedule; 
                 The ability of fuel providers to adapt to reduced demand  
               for gasoline and diesel fuels; 
                 The pace at which California drivers will purchase and  
               use flexible-fuel vehicles, and the ability of industry to  
               manufacture and integrate the needed engine technologies  
               capable of running on alternative fuels; 
                 The rate at which compliance credits associated with  
               alternative fuel consumption and sales can be generated to  
               offset the deficits that will be incurred when consuming  
               and selling (i.e. replacing) conventional gasoline and  
               diesel; and 

                 Overall economic impacts to the fuels industry." 

           
             The report goes on to review its preliminary examination of  
            potential cost impacts:
           
             "Our preliminary examination of potential cost impacts of  
            these regulations tell us the following: 
                 The 33 percent RPS requirement will likely lead to  
               increased prices and rates as utilities attempt to  
               incrementally phase renewable energy into their portfolios.  
               These incremental adjustments have already created  
               challenges in the industry's ability to provide reliable  









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               electric service (e.g. integration; source-to-load  
               transmission connections; etc.). 

                 Implementation has added to electricity prices  
               attributable to the "carbon component" of energy costs. The  
               California Independent System Operator ("CAISO") has  
               indicated that wholesale bids of gas-fired capacity in 2013  
               are reflecting the additional costs of carbon. At current  
               carbon prices, this can increase bids into the wholesale  
               market between $6 and $10/MWh, depending on the efficiency  
               of the plant. The impact that these carbon prices will have  
               on electricity bills will differ for end-use consumers due  
               to procedural rules regarding recycling of allowance  
               auction revenue. 

                 The California Air Resources Board ("CARB") has assumed  
               that full and rapid compliance with the LCFS will result in  
               negligible increases in the price of gasoline and diesel.  
               However, there appears to be considerable uncertainty on  
               the eventual cost impacts as well as considerable  
               litigation to date regarding the legality of the rule. This  
               is compounded by uncertainty regarding the potential supply  
               of alternative fuels and associated infrastructure required  
               for compliance."
           
             It is unclear whether this report has had any public or  
            independent review. It is also unclear whether this report has  
            been submitted to the CEC's IEPR proceeding so that it can be  
            reviewed and considered through the established IEPR process.

           1)CEC Integrated Energy Policy Report (IEPR).  The CEC's 2013  
            IEPR analyzes and makes recommendations on a wide range of  
            subjects, including energy efficiency, demand response,  
            renewables, electricity, natural gas, transportation, and  
            climate change. In preparation for the IEPR, the CEC conducts  
            assessments and forecasts of all aspects of energy industry  
            supply, production, transportation, delivery and distribution,  
            demand, and prices and uses this information to develop energy  
            policies that conserve resources, protect the environment,  
            ensure energy reliability, enhance the state's economy, and  
            protect public health and safety.

           2)Not substantively different than the current IEPR?  AB 1763  
            would require the CEC to prepare a report due on January 1,  
            2016, that is substantially similar to what the CEC is already  









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            required to do every other odd- numbered year. The major  
            differences between what the CEC is already required to do and  
            what AB 1763 directs the CEC to do are:

               AB 1763:
                     Excludes industry and agriculture in its definition  
                 of "energy"
                     Includes affordability of energy supplies (the  
                 current CEC IEPR statute requires 'pricing' analysis) 
                     Requires the new report to position California as a  
                 leader in the United States and world energy markets.

            It is unclear why industrial and agriculture sectors were not  
            included as they represent a significant and important part of  
            California's economy. 

            Since California is already considered a leader in the United  
            States and world energy markets and cited in many examples for  
            its leadership on energy efficiency, renewable energy, air  
            quality, and climate standards, as well as in other areas. It  
            is unclear how the new report can add to that status.
           
          1)Related Legislation.

             AB 1779 (Gaines, 2014) would require the CEC to prepare a  
            report that assesses the effect in the aggregate of specified  
            state policies on electricity reliability and rates and  
            whether these policies are achieving the stated environmental  
            and economic goals of these policies.  

             AB 1257 (Chapter 749, Statutes of 2013) which directed the CEC  
            to analyze natural gas use in the state. The legislation only  
            focused on natural gas use and was not directed at all energy  
            sources.  

             SB 1389 (Chapter 568, Statutes of 2002) by Senator Bowen and  
            Senator Sher consolidated and updated the CEC's reporting  
            requirements into one integrated report and requires the  
            reporting of the energy data from all entities that  
            participate in the state energy markets.  
           
           2)Support and opposition.
           
            Supporters state that this bill will secure an energy future  
            that balances economic and environmental goals, state that  









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            energy costs will increase due new legislative and regulatory  
            proposes intended to further greenhouse gas reductions.  
           
           REGISTERED SUPPORT / OPPOSITION  :   

           Support 
           
          California Business Roundtable
          California Chamber of Commerce
          California League of Food Processors
          California Manufacturers & Technology Association
          California Retailers Association
          California Small Business Association
          California Trucking Association
          Dependable Companies
          Inland Empire Economic Partnership
          Los Angeles Area Chamber of Commerce
          Montclair Chamber of Commerce
          National Federation of Independent Business (NFIB)
          San Gabriel Valley Economic Partnership
          Valley Industry and Commerce Association (VICA)
          Western States Petroleum Association (WSPA)

           Opposition 
           
          Sierra Club California
           
          Analysis Prepared by  :    Susan Kateley / U. & C. / (916)  
          319-2083