Amended in Assembly August 20, 2014

Amended in Assembly August 6, 2014

Amended in Assembly July 2, 2014

Amended in Assembly June 18, 2014

Amended in Senate May 5, 2014

Amended in Senate March 28, 2014

Senate Bill No. 1414

Introduced by Senator Wolk

(Coauthors: Assembly Members Mullin and Williams)

February 21, 2014

An act to amend Section 380 of, and to add Section 380.5 to, the Public Utilities Code, relating to electricity.

LEGISLATIVE COUNSEL’S DIGEST

SB 1414, as amended, Wolk. Electricity: demand response.

(1) The Public Utilities Act requires the Public Utilities Commission, in consultation with the Independent System Operator, to establish resource adequacy requirements for all load-serving entities, as defined, in accordance with specified objectives. The definition of a “load-serving entity” excludes a local publicly owned electric utility. The act requires each load-serving entity to maintain physical generating capacity adequate to meet its load requirements to provide reliable electric service. The act requires the begin delete commission end delete begin insert Public Utilities Commission end insert to determine the most efficient and equitable means for achieving prescribed objectives.

begin insert

The Warren-Alquist State Energy Resources Conservation and Development Act establishes the State Energy Resources Conservation and Development Commission and requires it to undertake a continuing assessment of trends in the consumption of electricity and other forms of energy, to analyze the social, economic, and environmental consequences of those trends and to collect from electric utilities, gas utilities, and fuel producers and wholesalers, and other sources, forecasts of future supplies and consumption of all forms of energy. That act requires the State Energy Resources Conservation and Development Commission, beginning November 1, 2003, and every 2 years thereafter, to adopt an integrated energy policy report that includes an overview of major energy trends and issues facing the state.

end insert

This bill would include, as an objective for the resource adequacy requirements referenced above, establishing begin insert new end insert or maintaining begin insert existing end insert demand response products and tariffs that facilitate the economic dispatch and use of demand response that can either meet or reduce an electrical corporation’s resource adequacy requirements, as determined by the begin delete commission. end delete begin insert Public Utilities Commission. end insert The bill would additionally require each load-serving entity to maintain both electrical demand response and physical generating capacity adequate to meet its load requirements. The bill would require the begin delete commission end delete begin insert Public Utilities Commission end insert to determine the most efficient and equitable means to ensure that investments are made in new and existing demand response resources that are cost effective and help to achieve begin insert electrical end insert grid reliability and the state’s begin delete greenhouse gas emissions reduction goals. end delete begin insert goals for reducing emissions of greenhouse gases. end insert The bill would require the begin delete commission end delete begin insert Public Utilities Commission end insert to begin insert ensure appropriate valuation of both supply and load modifying demand response resources and to end insert establish a mechanism to value load modifying demand response resources, including, but not limited to, the ability of demand response resources to help meet distribution needs, transmission system needs, and to help reduce a load-serving entity’s resource adequacy obligation. The bill would require the begin delete commission end delete begin insert Public Utilities Commission, State Energy Resources Conservation and Development Commission, and the Independent System Operator end insert to ensure that changes in demand caused by load modifying demand response are expeditiously and comprehensively reflected in begin delete relevant forecasting and end delete begin insert the integrated energy policy report forecast, as well as end insert planning proceedings and associated analyses begin insert , end insert and encourage reflection of these changes in demand in the operation of the grid. The bill would require the begin delete commission, end delete begin insert Public Utilities Commission, end insert in establishing a demand response program, to take certain actions.

(2) Under existing law, a violation of the Public Utilities Act or an order or direction of the begin delete commission end delete begin insert Public Utilities Commission end insert is a crime.

This bill would be part of the begin delete act end delete begin insert Public Utilities Act end insert and an order or other action of the begin delete commission end delete begin insert Public Utilities Commission end insert would be required to implement the bill. Because a violation of this bill or an order or other action of the begin delete commission end delete begin insert Public Utilities Commission end insert implementing those provisions would be a crime, and because the bill would make certain violations by a load-serving entity a crime, this bill would thereby impose a state-mandated local program by creating new crimes and by expanding the definition of existing crimes.

(3) The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: yes.

The people of the State of California do enact as follows:

SECTION 1.  

(a) The Legislature finds and declares all of the
following:

(1) Demand response programs and tariffs empower customers
to save money and reduce pollution by making electrical demand
smart, dynamic, and responsive.

(2) Demand response allows for a smarter electrical grid that
reduces demand for electricity during peak hours when the grid
operator would otherwise often be forced to rely on quite inefficient
fossil fuel peaking plants.

(3) Demand response can play a pivotal role in integrating clean
energy resources onto the electrical grid by shifting electricity
usage to times when there is abundant electricity generated by
renewable energy resources available and can help provide
electrical capacity in southern California following the closure of
the San Onofre Nuclear Generation Station and the phase out of
natural gas fired powerplants that employ once-through cooling.

(4) Reducing and shifting demand for electricity through demand
response can negate the need for more costly investments in
powerplants and transmission lines.

(5) Increasing the role of demand response will reduce emissions
of greenhouse gases and other pollutants from the electricity sector.

(6) Other regions of the United States have achieved substantial
reductions in peak demand through deployment of demand
response.

(b) In enacting this act, it is the intent of the Legislature to ensure
that California and the Public Utilities Commission help meet the
state’s greenhouse gas emissions reduction goals and achieve
begin insert electrical end insert grid reliability by increasing the utilization of demand
response.

(c) It is further the intent of the Legislature, in enacting this act,
to ensure that the procurement, programmatic, begin delete rate-based, end delete
begin insert tariff end insert begin insert -based, end insert and other options that the Public Utilities Commission
is pursuing or may pursue in furtherance of demand response are
in no way hindered or superseded by the provisions in this act.

SEC. 2.  

Section 380 of the Public Utilities Code is amended
to read:

380.  

(a) The commission, in consultation with the Independent
System Operator, shall establish resource adequacy requirements
for all load-serving entities.

(b) In establishing resource adequacy requirements, the
commission shall achieve all of the following objectives:

(1) Facilitate development of new generating capacity and
retention of existing generating capacity that is economic and
needed.

(2) Establish begin insert new end insert or maintain begin insert existing end insert demand response products
and tariffs that facilitate the economic dispatch and use of demand
response that can either meet or reduce an electrical corporation’s
begin insert resource end insert adequacy requirements, as determined by the commission.

(3) Equitably allocate the cost of generating capacity and
demand response in a manner that prevents the shifting of costs
between customer classes.

(4) Minimize enforcement requirements and costs.

(5) Maximize the ability of community choice aggregators to
determine the generation resources used to serve their customers.

(c) Each load-serving entity shall maintain physical generating
capacity and electrical demand response adequate to meet its load
requirements, including, but not limited to, peak demand and
planning and operating reserves. The generating capacity or
electrical demand response shall be deliverable to locations and
at times as may be necessary to maintain electric service system
reliability and local area reliability.

(d) Each load-serving entity shall, at a minimum, meet the most
recent minimum planning reserve and reliability criteria approved
by the Board of Directors of the Western Systems Coordinating
Council or the Western Electricity Coordinating Council.

(e) The commission shall implement and enforce the resource
adequacy requirements established in accordance with this section
in a nondiscriminatory manner. Each load-serving entity shall be
subject to the same requirements for resource adequacy and the
renewables portfolio standard program that are applicable to
electrical corporations pursuant to this section, or otherwise
required by law, or by order or decision of the commission. The
commission shall exercise its enforcement powers to ensure
compliance by all load-serving entities.

(f) The commission shall require sufficient information,
including, but not limited to, anticipated load, actual load, and
measures undertaken by a load-serving entity to ensure resource
adequacy, to be reported to enable the commission to determine
compliance with the resource adequacy requirements established
by the commission.

(g) An electrical corporation’s costs of meeting begin insert or reducing end insert
resource adequacy requirements, including, but not limited to, the
costs associated with system reliability and local area reliability,
that are determined to be reasonable by the commission, or are
otherwise recoverable under a procurement plan approved by the
commission pursuant to Section 454.5, shall be fully recoverable
from those customers on whose behalf the costs are incurred, as
determined by the commission, at the time the commitment to
incur the cost is made, on a fully nonbypassable basis, as
determined by the commission. The commission shall exclude any
amounts authorized to be recovered pursuant to Section 366.2
when authorizing the amount of costs to be recovered from
customers of a community choice aggregator or from customers
that purchase electricity through a direct transaction pursuant to
this subdivision.

(h) The commission shall determine and authorize the most
efficient and equitable means for achieving all of the following:

(1) Meeting the objectives of this section.

(2) Ensuring that investment is made in new generating capacity.

(3) Ensuring that existing generating capacity that is economic
is retained.

(4) Ensuring that the cost of generating capacity and demand
response is allocated equitably.

(5) Ensuring that community choice aggregators can determine
the generation resources used to serve their customers.

(6) Ensuring that investments are made in new and existing
demand response resources that are cost effective and help to
achieve begin insert electrical end insert grid reliability and the state’s begin delete greenhouse gas
emissions reduction goals. end delete begin insert goals for reducing emissions of
greenhouse gases. end insert

(i) In making the determination pursuant to subdivision (h), the
commission may consider a centralized resource adequacy
mechanism among other options.

(j)  begin insert The commission shall ensure appropriate valuation of both
supply and load end insert begin insert modifying demand response resources. end insert The
commission, in an existing or new proceeding, shall establish a
mechanism to value load modifying demand response resources,
including, but not limited to, the ability of demand response
resources to help meet distribution needs and transmission system
needs and to help reduce a load-serving entity’s resource adequacy
obligation pursuant to this section. In determining this value, the
commission shall consider how these resources further the state’s
electrical grid reliability and the state’s begin delete greenhouse gas emissions
reduction goals. end delete begin insert goals for reducing emissions of greenhouse gases. end insert
The begin delete commission shall end delete begin insert commission, Energy Commission, and
Independent System Operator shall jointly end insert ensure that changes in
demand caused by load modifying demand response are
expeditiously and comprehensively reflected in begin delete relevant forecasting
and end delete begin insert the Energy Commission’s Integrated Energy Policy Report
forecast, as well as in end insert planning proceedings and associated begin delete analyses end delete
begin insert analyses, end insert and begin insert shall end insert encourage reflection of these changes in
demand in the operation of the grid.

(k) For purposes of this section, “load-serving entity” means an
electrical corporation, electric service provider, or community
choice aggregator. “Load-serving entity” does not include any of
the following:

(1) A local publicly owned electric utility.

(2) The State Water Resources Development System commonly
known as the State Water Project.

(3) Customer generation located on the customer’s site or
providing electric service through arrangements authorized by
Section 218, if the customer generation, or the load it serves, meets
one of the following criteria:

(A) It takes standby service from the electrical corporation on
a commission-approved rate schedule that provides for adequate
backup planning and operating reserves for the standby customer
class.

(B) It is not physically interconnected to the electrical
transmission or distribution grid, so that, if the customer generation
fails, backup electricity is not supplied from the electrical grid.

(C) There is physical assurance that the load served by the
customer generation will be curtailed concurrently and
commensurately with an outage of the customer generation.

SEC. 3.  

Section 380.5 is added to the Public Utilities Code, to
read:

380.5.  

(a) In establishing a demand response program, the
commission shall do all of the following:

(1) Establish rules consistent with state and federal law for how
and when back-up generation may be used within the program and
establish reporting and data collection requirements to verify
compliance with those rules.

(2) Ensure the program approved for resource adequacy
requirements delivers the expected results and provides ratepayer
benefits.

(3) Before the implementation of a program for residential
customers, establish customer protection rules regarding the
participation, cost of participation, and ability to begin delete opt out of end delete begin insert not
enroll in end insert the program. A residential customer who begin delete opts out of end delete begin insert does
not enroll in end insert the program shall lose eligibility for rebates, discounts,
and other incentives offered to customers who participate in the
program. The commission shall prohibit the imposition of charges
on a residential customer for begin delete opting out of end delete begin insert not enrolling in end insert the
program. begin delete A residential customer who opts out of the program shall
still be eligible for time-variant pricing. end delete

(4) Establish a method to accurately calculate the customer’s
load shift at time intervals in which the customer would be eligible
for demand response program payments or credits.

(5) Establish metering and monitoring policies for the program.

(b) This section does not apply to time-variant begin delete pricing
established pursuant to Section 745. end delete begin insert pricing as defined in Section
745, including time-of-use rates, critical peak pricing, and
real-time pricing, or to similar tariffs, including peak time rebates. end insert

SEC. 4.  

No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of
the Government Code, or changes the definition of a crime within
the meaning of Section 6 of Article XIII B of the California
Constitution.