BILL ANALYSIS Ó
SB 1414
Page 1
SENATE THIRD READING
SB 1414 (Wolk)
As Amended August 6, 2014
Majority vote
SENATE VOTE :31-0
UTILITIES & COMMERCE 14-0
APPROPRIATIONS 17-0
-----------------------------------------------------------------
|Ayes:|Patterson, Bonilla, |Ayes:|Gatto, Bigelow, |
| |Buchanan, Chávez, Dahle, | |Bocanegra, Bradford, Ian |
| |Fong, Beth Gaines, | |Calderon, Campos, |
| |Garcia, Roger Hernández, | |Donnelly, Eggman, Gomez, |
| |Jones, Mullin, Quirk, | |Holden, Jones, Linder, |
| |Rendon, Skinner | |Pan, Quirk, |
| | | |Ridley-Thomas, Wagner, |
| | | |Weber |
|-----+--------------------------+-----+--------------------------|
| | | | |
-----------------------------------------------------------------
SUMMARY : Requires utilities and regulators to include demand
response (DR) in resource adequacy plans, as specified.
Specifically, this bill :
1)Requires each load-serving entity to maintain either
electrical demand reductions or physical generating capacity
adequate to meet its load requirements.
2)Requires the California Public Utilities Commission (PUC) to
determine the most efficient and equitable means to sure the
inclusion of DR that is reliable and cost effective in
achieving environmental or demand reduction goals or grid
reliability.
3)Requires the PUC to establish a mechanism to value load
modifying DR resources that can reduce a load serving entity's
resource adequacy obligation.
4)Requires the PUC to ensure that changes in demand caused by
load modifying DR are expeditiously and comprehensively
reflected in relevant forecasting and planning proceedings and
associated analyses and encourage reflection of these changes
SB 1414
Page 2
in demand in the operation of the grid.
5)Ensures the PUC, in establishing a DR program, to take certain
actions.
6)Makes findings and declarations about the benefits of DR
programs.
EXISTING LAW :
1)Requires all load-serving entities to maintain sufficient
electric generation to meet demand for electricity and ensure
the safe and reliable operation of the grid. (Public
Utilities Code Section 380)
2)Requires electrical corporations to file, and the PUC to
review and approve long-term procurement plans to ensure that
the investor-owned utilities have sufficient and diverse short
and long-term electricity and demand reduction resources that
are cost-effective, reliable, and feasible to serve its
customers. (Public Utilities Code Section 454.5)
FISCAL EFFECT : According to the Assembly Appropriations
Committee:
1)Increased one-time costs to the PUC of approximately $300,000
(Public Utilities Reimbursement Account) for expanding
proceedings.
2)Ongoing increased compliance costs to the PUC of approximately
$150,000 (Public Utilities Reimbursement Account)
COMMENTS : According to the author, "SB 1414 will help ensure
that regulators and utilities utilize cost-effective demand
response programs to change their demand for electricity during
key times. With DR, in exchange for changing their electricity
use, participating customers receive incentives for providing a
clean resource to the system. Their reductions in demand
(consumption) mean there can be less supply (generation),
providing clean energy, reducing the need for "peaker" power
plants and helping to integrate renewables. California
currently lags behind other parts of the nation in utilizing
demand response."
SB 1414
Page 3
What is demand response? DR refers to a family of programs that
seek to achieve electric load reductions via actions taken
though end-use electric customers during a given time period, in
response to a price signal, or to address a situation where
reliability or safety of the electricity grid is at risk.
Various programs provide incentives or rate discounts, or both
to customers who participate in a DR Program. Examples of DR
programs include: Pacific Gas & Electric Company (PG&E) Smart
Rate, San Diego Gas & Electric (SDG&E) Peak Time Rebate Program,
Southern California Edison (SCE) Summer Discount Program, and
Business Interruptible Programs.
DR programs are administered by the investor-owned utilities
(IOUs): PG&E, SCE, and SDG&E. Most of the utility DR programs
target large commercial and industrial customers that are
equipped with meters that are capable of measuring and reporting
energy usage in one hour intervals or less. The utilities also
administer third-party DR programs known as an aggregator
managed program. The utilities contract with a DR provider who
works with a variety of end-use customers to deliver the
necessary demand reductions when called upon by the utility.
These contracts are negotiated between the utility and the
third-party DR provider.
The theory of DR is that savings are achieved through reduced
demand for electricity which offsets the need to build new
generation and infrastructure to meet electricity needs. As a
result, payments from nonparticipating ratepayers can be
provided to these programs participants based on the expected
savings.
For the most part, DR programs have been limited to the
commercial and industrial users, who have been on time-of-use
rates for some time. With the extensive deployment of
residential smart metering, the residential customer is likely
to become a larger focus of DR programs.
The PUC has an open proceeding underway to address ways to
enhance the use of DR in meeting energy needs. In a recent PUC
decision (D. 14-03-02, March 2014) the PUC determined that DR
can be characterized in one of two ways: DR as load modifying
or DR as supply resource. As a follow up to the PUC's decision,
the PUC is seeking comments on which types of DR programs are to
SB 1414
Page 4
be categorized as Load Modifying or Supply Resources (DR as a
Supply Resource would be treated as if it was a generation
facility). Ultimately, utilities will be authorized to develop
DR programs that can be bid into the California wholesale
electricity market. In exchange, the wholesale DR products
could receive payments for Resource Adequacy, Capacity, or other
attributes that might normally be paid only to traditional
generators.
Analysis Prepared by : DaVina Flemings / U. & C. / (916)
319-2083
FN: 0004933