BILL ANALYSIS �
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|SENATE RULES COMMITTEE | SB 48|
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THIRD READING
Bill No: SB 48
Author: Hill (D)
Amended: 5/8/13
Vote: 21
SENATE ENERGY, UTIL. & COMMUNIC. COMM. : 10-0, 4/30/13
AYES: Padilla, Fuller, Cannella, Corbett, De Le�n, DeSaulnier,
Hill, Pavley, Wolk, Wright
NO VOTE RECORDED: Knight
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
SUBJECT : Public utilities: research and development projects
SOURCE : Author
DIGEST : This bill enhances the California Public Utilities
Commission's (CPUC) financial accountability by requiring
non-competitive research proposals for all projects requesting
more than $1.5 million of customer funds to undergo peer review
by independent experts.
ANALYSIS :
Existing law:
1.Provides that the CPUC has regulatory authority over public
utilities, including electrical corporations, gas
corporations, heat corporations, and telephone corporations,
as defined.
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2.Authorizes the commission to fix the rates and charges for
every public utility, and requires that those rates and
charges be just and reasonable.
3.Authorizes electrical corporations, gas corporations, heat
corporations, and telephone corporations to voluntarily adopt
certain research and development programs and authorizes the
CPUC to allow inclusion of expenses for research and
development in rates.
4.Requires the CPUC to consider specified guidelines in
evaluating the research, development, and demonstration
programs proposed by electrical corporations and gas
corporations.
This bill:
1.Requires that when the CPUC reviews a request from a public
utility for authorization to incur expenses for a research and
development project, as defined, where the project expenses
are to be recovered from ratepayers and are in excess of
$1,500,000 per year, the CPUC is to administer a "peer
review."
2.Defines "peer review" to mean a thorough, consistent, and
objective examination based on pre-established criteria by
persons who are independent of persons submitting an
application, or conducting the research and development, and
who are knowledgeable in the field of endeavor to which the
application or research and development pertains.
3.Requires that the peer review consider all of the following:
A. The overall scientific or technical merits of the
proposed research and development project.
B. The extent to which the same or similar research,
development, and demonstration work could be performed by
entities that the public utility does not select.
C. The appropriateness of the level of requested funding in
comparison to other projects by similarly experience
individuals using similar facilities performing in similar
timeframes and circumstances.
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D. The likelihood that the proposed work can be
accomplished within the proposed time and budget by the
investigators or the technical staff, given their
experience and expertise and available resources.
1.Requires the CPUC, by December 31, 2014, and by December 31 of
each 3rd year thereafter, to prepare and submit a report to
the relevant policy and fiscal committees of the Legislature
listing all research and development projects where the
expenses of the project were or are recovered from ratepayers
during the previous 3 years, as specified.
Background
The CPUC's staff, in a report issued last February, found that
"the CPUC currently lacks a centralized system or programmatic
structure to review and track ratepayer-funded applied research
and demonstration projects" (Electric Program Investment Charge
(EPIC): Staff Report).
The CPUC currently grants research funding in general rate case,
energy efficiency, demand response, smart grid, California Solar
Initiative (CSI), and electric program investment charge EPIC
proceedings. Additionally, hundreds of millions of dollars have
been approved for orphan applications, such as those for
electric grid research and cyber security, wave energy, carbon
capture and storage, compressed air energy storage, and storage
from wind energy.
Together, the author has identified almost $400 million in
research funds approved by the CPUC in the last five years -
which doesn't include the annual $24 million and roughly $140
million that have gone to the Energy Commission to administer
energy research.
Of the hundreds of millions of dollars in projects approved by
the CPUC without the help of the Energy Commission, the lion's
share of it has gone to a small number of projects that were
approved as sole-source. None of those projects were subject to
review by independent experts - peer reviewed.
This is despite the CPUC's stated preference that research is
awarded after an open solicitation whenever possible.
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The federal Department of Energy calls for peer review of all
projects (other than those mandated by Congress), and requires
projects that have not been competitively bid to undergo more
rigorous review. The CPUC has instituted none of this.
Similarly, the CPUC has required virtually no reporting
requirements for customer-funded research. In this way, their
organization and tracking of the hundreds of millions of dollars
of research funds appears to be as poor as their
recently-highlighted budgeting practices.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
SUPPORT : (Verified 5/19/13)
Division of Ratepayer Advocates
Sierra Club California
The Utility Reform Network
OPPOSITION : (Verified 5/19/13)
California Public Utilities Commission
ARGUMENTS IN SUPPORT : The Division of Ratepayer Advocates
(DRA) writes: SB 48 would instill greater accountability and
transparency of ratepayer-funded research, development and
demonstration (RD&D) projects authorized by the CPUC. DRA
specifically supports the provision in SB 48 which requires the
CPUC to submit to the Legislature an annual report on all RD&D
projects funded in whole or in part by California's electric and
gas ratepayers. Such a comprehensive report would provide the
information needed for the state to ensure that ratepayer funds
are used effectively in support of research and innovation in
the electric and gas sectors.
ARGUMENTS IN OPPOSITION : The California Public Utilities
Commission writes: The potential unintended consequences of
this bill outweigh the benefits. Potential consequences of the
legislation include discouraging peer review and sun shining of
the research and development (R&D) projects by favoring small
projects that do not trigger peer review (those under 1.5m) and
selection of projects through open solicitations.
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The bill would discourage projects with statewide benefits by
encouraging small projects specific to the service area of an
applicant utility. System - wide projects addressing the
interplay between utilities, such as integrating renewables into
the electrical grid or addressing the safety of the pipeline
network, would be more difficult to fund. This will frustrate
the purpose of the R&D funds to address statewide infrastructure
and issues of concern to the ratepayers of more than one
utility.
JG:ej 5/20/13 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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