BILL ANALYSIS                                                                                                                                                                                                    Ó




                                                                  AB 2145
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          Date of Hearing:   April 28, 2014

                    ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
                               Steven Bradford, Chair
                   AB 2145 (Bradford) - As Amended:  April 10, 2014
           
          SUBJECT  :   Electricity: community choice aggregation.

           SUMMARY  :   Makes specific reforms to the community choice  
          aggregation (CCA) program.  
          Specifically,  this bill  :  

          1)Requires customers to opt-in to CCA's effective January 1,  
            2015.

          2)Requires CCA implementation plans to include information to  
            customers about the following: 
               a)     rates as compared to the incumbent utility 

               b)     greenhouse gas emission rate using protocols  
                 established by the California Air Resources Board

          1)Authorizes the California Public Utilities Commission (PUC) to  
            process complaints against the CCA, as the incumbent utility,  
            prescribed by law.

           EXISTING LAW  :

             1)   States the PUC has regulatory authority over public  
               utilities, including electrical corporations and gas  
               corporations. (Public Utilities Code §701)

             2)   States customers shall be entitled to aggregate their  
               electric loads as members of their local community with  
               community choice aggregators. (Public Utilities Code  
               §366.2(a)(1))

             3)   Provides that customers may aggregate their loads  
               through a public process with community choice aggregators,  
               if each customer is given an opportunity to opt-out of his  
               or her community's aggregation program. (Public Utilities  
               Code §366.2(a)(2)

             4)   Requires that a community choice aggregator establishing  
               electrical load aggregation shall develop an implementation  









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               plan detailing the process and consequences of aggregation.  
               (Public Utilities Code §(c)(3))

           FISCAL EFFECT  :   Unknown.

           COMMENTS  :   According to the author, "community choice  
          aggregation arose out of the rolling blackouts and huge rate  
          increases caused by the 2001 Energy Crisis. As California was  
          grasping for solutions, the Legislature authorized community  
          choice aggregation which granted local governments the  
          extraordinary power to unilaterally switch all customers in  
          their jurisdiction from the local utility to the community  
          choice aggregator. Community choice aggregators are intended to  
          provide communities with lower rates, local renewable energy,  
          and jobs.  I believe it is time for some mid-course corrections  
          to ensure that communities can know how well the community  
          choice aggregator will meet these goals.  AB 2145 promotes  
          consumer choice and transparency for future community choice  
          aggregator customers."

           1)Background  :  In the wake of the 2001 Energy Crisis, the state  
            Legislature expressed the
            state's policy to permit and promote Community Choice  
            Aggregation (CCA's) by enacting AB 117 (Migden, Chapter 838,  
            Statutes of 2002), which authorizes the creation of CCAs,  
            describes essential CCA program elements, requires the state's  
            utilities to provide certain services, and establishes methods  
            to protect existing utility customers from liabilities that  
            they might otherwise incur when a portion of the utility's  
            customers transfer their energy services to a CCA. CCAs are  
            governmental entities formed by cities and counties to serve  
            the energy requirements of their local residents and  
            businesses. Cities and counties have become increasingly  
            involved in implementing energy efficiency programs,  
            advocating for their communities in power plant and  
            transmission line siting cases, and developing distributed  
            generation and renewable resource energy supplies. The CCA  
            program takes these efforts one step further by enabling  
            communities to purchase power on behalf of the community. CCAs  
            rates and sources of electric supply are not regulated by the  
            PUC.  

            In April 2007, the PUC authorized its first CCA application  
            submitted by the Kings River Conservation District on behalf  
            of San Joaquin Valley Power Authority (SJVPA). In June, 2009  









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            SJVPA suspended its CCA program activities.
               
            In 2010, the PUC authorized a CCA application for Marin Energy  
            Authority (MEA/MCE) pursuant to a service agreement between  
            PG&E and MEA.  The aftermath of this decision was quite  
            contentious. PG&E launched, in June 2010, a statewide ballot  
            initiative seeking an amendment to the state constitution to  
            require two-thirds supermajority voter approval before local  
            governments could use public funds or issue bonds to establish  
            or expand public electricity service or community choice  
            aggregation. The proposition was rejected by an approximate 5  
            point margin. 

            Currently, MEA provides service to over 124,000 accounts in  
            Marin County and the City of Richmond located in Contra Costa  
            County.  

            The PUC authorized Clean Power S.F. to form a CCA in the City  
            and County of San Francisco in June 2010.  The San Francisco  
            Board of Supervisors authorized Clean Power S.F., but the San  
            Francisco Public Utilities Commission did not authorize the  
            rates.

            In October 2013, the PUC authorized a CCA application for  
            Sonoma Clean Power.  According to its Internet website,  
            "Sonoma County's startup public power agency is drawing closer  
            to the onset of service in May, seeing higher-than-expected  
            enrollment and savings for its first round of customers  
            compared to Pacific Gas & Electric Co."

           2)Should customers opt-in to CCAs  :  This bill would end the  
            practice of switching customers to a CCA without the  
            customer's consent, beginning on January 1, 2015. Existing CCA  
            customers are not impacted.  Current law requires a customer  
            to affirmatively opt-out of participation in the CCA. Various  
            media outlets across the state have published articles as  
            recent as last February regarding problems with opting out of  
            MEA. Customers complained of extended wait times when calling  
            MEA on multiple occasions to opt out of service.

            Proponents of this measure assert that most people are unaware  
            that a CCA was formed and have little understanding of the  
            implications when they receive a form letter in the mail that  
            says they don't have to do anything. A recent survey of  
            approximately 400 residents in the City of Richmond revealed  









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            nearly 75% are largely unfamiliar with MEA.<1> These residents  
            had no knowledge that they were already enrolled in MEA. A  
            vast majority of the residents believe PG&E is their utility  
            service provider.  In fact, CCA customers continue to receive  
            their monthly utility bill from the incumbent IOU with a line  
            item that delineates the CCA provider.

            According to MEA, "fewer than 24% of current residents and  
            businesses opted-out of service - 17% opted out prior to  
            receiving service from MEA while 6.5% opted out after service  
            commenced."  MEA opposes and claims "the customer opt-in  
            provision in the bill would limit MEA's ability to expand to  
            new communities, as it did with the City of Richmond on July  
            1, 2013."

           3)Are CCA rates lower than the local utility  ? CCA was  
            established on the premise to offer more affordable, reliable  
            and greener electricity service to customers than the  
            incumbent IOU.  For example, a detailed comparison prepared  
            jointly by MEA<2> and PG&E shows that the monthly residential  
            bills under various scenarios are very comparable.

           4)Claims about Greenhouse Gas Emissions Rates and Renewable  
            Energy.  MEA claims that its portfolio is greener than PG&E's.   
            According to proponents of the bill, MEA bases this claim on  
            the large number of Renewable Energy Certificates (RECs) it  
            purchases in addition to the generation it procures from Shell  
            Energy North America. RECs are a market instrument where a  
            buyer can purchase the "renewable attributes" separate from  
            the electricity generation from a project. REC-only  
            transactions are not the same as energy delivered to the  
            customer. Bundled REC energy means that both the REC and the  
            energy are purchased together. PG&E also contracts with Shell  
            Energy North America for Bundled REC energy and REC only  
            transactions. However, PG&E is not claiming to provide 50% or  
            100% renewable energy to its customers, while MCE is making  
            this claim.<3>  

             According to MEA, their Light Green product is 50% renewable  
            --------------------------
          <1> Fairbank, Maslin, Maullin, Metz & Associates polling results  
          - March 27-April 2, 2014
          <2> MEA is the only California CCA therefore this analysis of AB  
          2145 will draft from information that MEA has published about  
          its rates and electricity resources.
          <3> https://mcecleanenergy.com/








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            energy is purchased from wind, solar, biogas, and  
            hydroelectric projects in Northern California, Oregon, and  
            Washington State. 

            MEA's 2013 Integrated Resource Plan<4> indicates that Shell  
            Energy North America provides all of MEA's resource  
            requirements until energy deliveries from other MEA contracts  
            begin. There appears to be less than 20 MW of local renewable  
            generation from two landfill gas projects (~5MW) in Northern  
            California and one photovoltaic project (974 kilowatt) in San  
            Rafael. Beginning in 2014 10 MW of generation from a Sonoma  
            geothermal facility was added. Bundled and Unbundled REC  
            energy are almost in equal amounts.

            A large portion of MEA's generation is derived from "natural  
            gas/system energy." While MEA policy states that it prohibits  
            purchases from coal or nuclear facilities, it does not  
            describe how it verifies where its system energy (which  
            includes coal) is produced. It also notes that in 2014 it will  
            obtain generation from "potential renewables" and "other  
            carbon free" sources. These potential and carbon free sources  
            are not identified.

            This begs the question what standard should CCAs be held to  
            with regard to information CCAs provide to current and future  
            customers about its electricity resources? How are these  
            verified?

            AB 2145 requires CCA implementation plans to include  
            information to customers about the greenhouse gas emission  
            rate using protocols established by the California Air  
            Resources Board (CARB).  

           5)Statutory Renewable Energy Mandates.  The concept of a CCA was  
            placed in statute before California's Renewable Portfolio  
            Standard (RPS) was enacted and four years prior to the  
            California Solar Initiative.  Proponents of CCA argued at the  
            time that a CCA would allow local communities to choose a  
            greener electricity supply than was being provided by the  
            investor owned utilities (IOUs).  

             Since 2002, California IOUs have dramatically increased their  

            --------------------------
          <4>  
          http://marincleanenergy.org/sites/default/files/key-documents/Int 
          egrated_Resource_Plan_2013_Update.pdf








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            renewable energy portfolios. According to the PUC's February  
            2014 RPS Biennial Report, "retail sellers are on pace to meet  
            their Compliance Period 1 (2011-2013) RPS requirement of an  
            average 20% RPS and are on track to achieve the 33% RPS by  
            2020 with additional future procurement of RPS resources."<5>   
             
                
            PG&E's supply portfolio is more than 50% greenhouse gas  
            emission free due to its renewable generation combined with  
            the generation it produces from hydroelectric and nuclear  
            facilities.  PG&E REC purchases amount to less than 3% of the  
            2011-13 compliance period allowance of 25%.

           6)The promise of jobs has not materialized  . According to the  
            bill sponsors, the Coalition of California Utility Employees  
            (CCUE), "CCAs routinely promise to build local renewable  
            energy supplies to create local jobs."  CCUE claims that "MCE,  
            in particular, obtains most of its energy supply from Shell."   
            Since Shell's energy comes from fossil fuel containing system  
            power, it can come from anywhere in the western United  
            States."  CCUE opines that "CCAs have failed to create local  
            jobs, and instead are propping up generation outside of  
            California."  

            In contrast, the IOUs have entered into hundreds of power  
            purchase agreements for new renewable generation from plants  
            in California, creating thousands of good jobs.  

            The San Rafael Airport is the only local renewable project  
            delivering power to MEA currently.  However, MEA is working on  
            7 specific local renewable projects, and three broad-based  
            programs that grow local distributed renewable energy within  
            its service territory.  It is not known when each of these  
            projects will be completed. To the extent these renewable  
            projects are completed and deliver power, local jobs could be  
            created in the future.

           7)Closing a loophole  .  This bill attempts to close a loophole by  
            authorizing the PUC to process complaints against the CCA, as  
            well as the IOU, for violations relating to the CCA Act.   
            Currently, CCAs are obligated to file its implementation plan  
            with the CPUC, and this PUC is already obligated to review and  
            approve the CCA cost recovery plan. The CCA is prohibited from  


          ---------------------------
          <5> California Public Utilities Commission. RPS Biennial Report.  
          February 2014.








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            beginning to supply electricity until the PUC approves the  
            cost recovery plan.  

            It is not clear what authority the PUC has if a customer tries  
            to return to the incumbent IOU but the CCA delays or fails to  
            process the request. What if the CCA is not practicing  
            truth-in-advertising about rates or GHG emissions that do not  
            satisfy the statutory requirements?  

            This is not a statute in search of a problem as there is a  
            real example of "truth in advertising" regarding GHG  
            compliance costs. In October 2009 and January 2010 MCE  
            provided information materials that included a summary of "AB  
            32 compliance costs by community" along with a table listing  
            Marin County, San Rafael, Novato, Mill Valley, San Anselmo,  
            Larkspur, Corte Matera, Tiburon, Sausalito, Fairfax, Ross, and  
            Belvedere and suggested that without MCE these communities  
            would have compliance costs of in excess of $390 million but  
            with MCE their compliance costs would be reduced to a little  
            more than $131 million. 

            The only problem is that, according to the Air Resources Board  
            (ARB), cities and counties are not subject directly to AB 32  
            compliance costs. The ARB also points out that the cost  
            estimates appear to be based on two studies of the cost of  
            AB32 regulation on  small businesses  . The ARB also provided  
            three evaluations of the studies upon which the MCE cost  
            estimates appear to be derived by the Legislative Analyst  
            Office, Jim Sweeney of Stanford, and Matthew Kahn of UCLA.   
            The LAO analysis stated that the studies had "major problems  
            involving both data, methodology, and analysis. As a result of  
            these shortcomings, we believe that their principal findings  
            are unreliable." The Stanford study found that "their  
            estimates are highly biased, are based on poor logic and  
            unsound economic analysis, and are likely to be too large by a  
            factor of at least 10." The UCLA analysis found that the "cost  
            estimates are fatally flawed and vastly over-state the  
            expected costs of compliance with AB 32."

            This new PUC enforcement authority proposed in the bill is not  
            all encompassing. It is limited to violations of Public  
            Utilities Code §366.2. 

           REGISTERED SUPPORT / OPPOSITION  :   










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           Support 
           
          California Labor Federation
          Coalition of California Utility Employees (CCUE) (Sponsor)
          Individual Letters (310)
          Pacific Gas and Electric (PG&E)
          State Building and Construction Trades Council

           Opposition 
           
          350 San Francisco
          Alliance for Retail Energy Markets (AReM)
          Asian Pacific Environmental Network (APEN)
          Brad Wagenknecht, Napa County Supervisor, District 1
          California Solar Energy Industries Association (CALSEIA)
          California State Association of Counties (CSAC)
          Carbon Free Mountain View
          City of Richmond
          City of San Pablo
          City of Sunnyvale
          Climate Protection Campaign
          Community Environmental Council
          County of Marin
          Enlightenment Energy
          Environmental Health Coalition (EHC)
          Geenlining Institute
          Haight Ashbury Neighborhood Council
          Individual Letters (31)
          League of California Cities
          LEAN Energy US
          Local Clean Energy Alliance of the San Francisco Bay Area
          Los Angeles County Board of Supervisors
          Marin Clean Energy (MCE)
          Marin County Board of Supervisors
          Monterey Regional Waste Management District (MRWMD)
          Office of Ratepayer Advocates (ORA)
          Our City San Francisco
          OurEvolution Energy & Engineering
          Pacific Energy Advisors, Inc.
          Public Interest Coalition
          Resilient Neighborhoods
          San Diego Clean Energy
          San Francisco Clean Energy Advocates Alliance
          San Francisco Green Party
          Santa Cruz County Board of Supervisors









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          School Project for Utility Rate Reduction (SPURR)
          Shell Energy North America
          Sierra Club California
          Solar Energy Industries Association (SEIA)
          SolEd Benefit Corporation
          Sonoma Clean Power
          Sonoma County Board of Supervisors
          Sonoma County Regional Climate Protection Authority (RCPA)
          Sonoma Water Agency
          Sungevity
          Sustainable Marin
          The Utility Reform Network (TURN)
          Thomas Cromwell, Mayor, City of Belvedere
          Town of Fairfax
          Western Power Trading Forum (WPTF)
           
          Analysis Prepared by  :    DaVina Flemings / U. & C. / (916)  
          319-2083