BILL ANALYSIS Ó SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE ALEX PADILLA, CHAIR AB 1763 - Perea Hearing Date: June 17, 2014 A As Amended: May 5, 2014 FISCAL B 1 7 6 3 DESCRIPTION Current law requires the California Energy Commission (CEC) to develop, every two years, an integrated energy policy report (IEPR) that assesses 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) and presents policy recommendations based on assessments of the most pressing energy trends and issues. (Public Resources Code § 25300 et seq.) This bill directs the CEC, in consultation with the California Independent System Operator (CAISO), other relevant state and local agencies, and interested stakeholders to develop a "state energy plan" for 2030 and 2050 as part of its 2015 IEPR. The bill defines "energy" as electricity, natural gas, and transportation fuels that are used in the state. The bill directs the CEC to consider, when developing the plan, energy forecasts; an analysis of California's current and future energy infrastructure needs; and recommendations on ensuring long-term energy resource reliability, sustainability, and affordability through 2050. BACKGROUND Function of State Energy Plans - A 2013 report<1> by the National Association of State Energy Officials states the --------------------------- <1> An Overview of Statewide Comprehensive Energy Plans From 2002 to 2011, NASEO, July, 2013; http://www.naseo.org/Data/Sites/1/naseo_39_state_final_7-19-13.pd f following: 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 ? The majority of plans stress the development of a diversified energy portfolio to meet the states' economic, environmental, and security objectives. 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. Energy Action Plan - In 2003, the CEC, the California Public Utilities Commission (CPUC), and the California Power Authority (now defunct) adopted the Energy Action Plan, which articulated a common, unified approach to meeting California's energy needs. In 2005, the CEC and the CPUC adopted a second plan, Energy Action Plan II, to reflect the policy changes and actions of the ensuing two years. By 2008, the state's energy policies had - and have since - been significantly influenced by the passage of Assembly Bill 32, yet the agencies did not find it necessary or productive to create a completely new plan. The 2008 Energy Action Plan Update examined the state's energy-related actions in light of its commitment to reducing greenhouse gas emissions. No other plan has been written since the 2008 Update. CEC Integrated Energy Policy Report (IEPR) - The IEPR, which is updated every two years,<2> presents in-depth assessments of energy, supply, demand, pricing, reliability, efficiency, and impacts on human and environmental health and safety. Each assessment is based on a set of data and assumptions, which may differ in their completeness and/or accuracy. The IEPR also presents policy recommendations (based on the assessments) intended to help decision-makers reach stated end goals: conserve resources, protect the environment, ensure energy reliability, enhance the state's economy, and protect public health and safety. Importantly, the assessments and associated policy recommendations are not mandates and, therefore, require --------------------------- <2> The next IEPR is due November 1, 2015. 2 action from the Governor, the Legislature, or other decision-makers to have any effect. 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, many of our policies have been adopted independently of each other and implemented in a variety of regulatory agency settings. There is currently no energy plan that encompasses all of our existing energy policies and provides a framework for our energy platform moving forward. Having a state energy plan, forecasted out for the next 35 years will allow the Legislature and Governor to have a focused plan that can be used to inform future policy and decision making." 2. IEPR Duplication ? This bill directs the CEC to develop a state energy plan that promotes economic growth, ensures energy resources, complements environmental goals, and positions the state as a leader. This is different than the state's IEPR, which presents multiple assessments and makes policy recommendations based on those assessments but does not direct the overall development of California's energy future. The IEPR includes a broad, 10-year (volumetric) forecast of demand for electricity. It does not forecast energy infrastructure needs or any other dimension of the state's energy economy. 3. Research and Analysis, Not Just Synthesis, Would be Required . The author states that the state energy plan would require the synthesis and presentation of information already available to the CEC. The CEC reports that this information (used to write the IEPR) represents only a portion of what would be required to develop the state energy plan called for in this bill. For example, CEC staff has neither data nor analytical capability regarding population projections. Moreover, forecasts post-2030 would be speculative because current and mid-term conditions cannot accurately predict 3 conditions that far into the future. As recent history reflects, a prescriptive, one-time energy plan developed 35 years ago could not have foreseen or planned for the impacts of innovative technology (relating to energy efficiency, rooftop solar, fuel cells, etc.) on our current energy and transportation sectors. Storage was not considered an option years ago, but is quickly becoming commercially viable. 4. Overall, This Plan May Be Premature . In Joint testimony to the Little Hoover Commission on April 11, 2014, the Governor's Office, CEC, CAISO, and CPUC stated that state agencies are jointly conducting comprehensive data analyses and modeling to determine a 2030 greenhouse gas reduction target and developing an integrated, economy-wide plan for achieving that target. The plan will consider the interplay between diverse sectors,<3> cost impacts, and the proper sequence for implementing various reduction strategies. The Administration anticipates completing the plan by the end of 2014 and releasing it for public review and comment as a supplement to the AB 32 Scoping Plan in early 2015. Based on public and stakeholder input, the Administration anticipates submitting a proposal to implement the plan to the Legislature later in 2015. 5. Related Legislation . AB 1257 (Bocanegra, Chapter 749, Statutes of 2013) required the CEC, beginning November 1, 2015 and every four years thereafter, to analyze natural gas use in the state and identify strategies to maximize the benefits of natural gas, as specified, in conjunction with the IEPR. The legislation only focused on natural gas use and was not directed at all energy sources. AB 1779 (Gaines) 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 environmental and economic goals of these policies. Status: Failed passage in ------------------------- <3> The major sectors of the economy that contribute to GHG emissions include energy, transportation, water, agriculture, natural and working lands, waste management, etc. 4 the Assembly Committee on Natural Resources. SB 1125 (Pavley) would require the State Air Resources Board (ARB) to develop greenhouse gas emissions targets for 2030 and report them to the Legislature. Status: Held in the Senate Committee on Appropriations. AB 2050 (Quirk) would require the ARB to include specified items, a proposal for further reducing greenhouse gas emissions by 2050, in the next AB 32 (Nunez, Chapter 488, Statutes of 2006) Scoping Plan Update (2019) and to report to the Legislature. The current proposed update arguably already includes 2050 and intermediate goal "proposals," though it stops short of proposing or adopting specific targets. Status: Pending consideration in the Senate Committee on Environmental Quality. 6. Double Referral . Should this bill be approved by the committee, it will be re-referred to the Senate Committee on Environmental Quality for its consideration. ASSEMBLY VOTES Assembly Floor (70-3) Assembly Appropriations Committee (16-0) Assembly Natural Resources (8-0) Assembly Utilities and Commerce Committee (11-0) POSITIONS Sponsor: Author Support: ------------------------------------------------------------------ |CA Asian Pacific Chamber of |Inland Empire Economic | |Commerce |Partnership | |California Business Roundtable |Little Hoover Commission | |California Chamber of Commerce |Los Angeles Area Chamber of | |California Grocers Association |Commerce | |California League of Food |Los Angeles County Business | 5 |Processors |Federation | |CA Manufacturers and Technology |National Federation of | |Association |Independent Business | |California Small Business |Orange County Business Council | |Association |San Diego Gas & Electric | |City of Bell |Company | |City of Lynwood |San Diego Regional Chamber of | |DeWitt Petroleum |Commerce | |Industrial Environmental |San Gabriel Valley Economic | |Association |Partnership | | |Western States Petroleum | | |Association | | |2 Individuals | | | | ------------------------------------------------------------------ Oppose: American Lung Association in California Asian Pacific Environmental Network California League of Conservation Voters Clean Power Campaign Physicians for Social Responsibility - Los Angeles Sierra Club California Alexis Erwin AB 1763 Analysis Hearing Date: June 17, 2014 6