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