BILL ANALYSIS Ó AB 2145 Page A 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 AB 2145 Page B 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 AB 2145 Page C 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 AB 2145 Page D 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/ AB 2145 Page E 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 AB 2145 Page F 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. AB 2145 Page G 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 : AB 2145 Page H 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 AB 2145 Page I 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