BILL ANALYSIS                                                                                                                                                                                                    




           ----------------------------------------------------------------- 
          |SENATE RULES COMMITTEE            |                         AB 33|
          |Office of Senate Floor Analyses   |                              |
          |(916) 651-1520    Fax: (916)      |                              |
          |327-4478                          |                              |
           ----------------------------------------------------------------- 


                                   THIRD READING 


          Bill No:  AB 33
          Author:   Quirk (D), et al.
          Amended:  8/2/16 in Senate
          Vote:     21 

           PRIOR VOTES NOT RELEVANT

           SENATE ENERGY, U. & C. COMMITTEE:  11-0, 6/13/16
           AYES:  Hueso, Morrell, Cannella, Gaines, Hertzberg, Hill, Lara,  
            Leyva, McGuire, Pavley, Wolk

          SENATE APPROPRIATIONS COMMITTEE:  Senate Rule 28.8

           SUBJECT:   Electrical corporations:  energy storage systems


          SOURCE:    Author


          DIGEST:  This bill makes new pumped hydroelectric storage  
          facilitates eligible for any increased energy storage system  
          targets adopted by the California Public Utilities Commission  
          (CPUC).  This bill states that it is declaratory of existing law  
          and does not limit the CPUC's discretion in developing or  
          adopting targets for a load-serving entity to procure viable and  
          cost-effective energy storage systems.
          
          ANALYSIS:  

          Existing law:
          
          1)Defines "load-serving entity" (LSE) as an electrical  
            corporation (investor-owned utility, or IOU), energy service  
            providers or community choice aggregators.  (Public Utilities  
            Code 380(k)) 








                                                                      AB 33  
                                                                    Page  2




          2)Requires the CPUC to determine appropriate targets, if any,  
            for LSEs to procure energy storage systems.  Requires LSEs to  
            meet any targets adopted by the CPUC by 2015 and 2020.   
            Requires publicly owned utilities (POUs) to set their own  
            targets for the procurement of energy storage and then meet  
            those targets by 2016 and 2021.  (Public Utilities Code 2835  
            et seq.) 

          3)Directs the California Energy Commission (CEC) and the CPUC,  
            where feasible, to authorize procurement of resources to  
            provide grid reliability services that minimize reliance on  
            system power and fossil fuel resources and, where feasible,  
            cost effective, and consistent with other state policy  
            objectives, increase the use of large- and small-scale energy  
            storage.  (Public Utilities Code 400) 

          This bill declares pumped hydroelectric storage facilities  
          eligible for any increases in energy storage procurement targets  
          adopted by the CPUC on or after January 1, 2017.  This bill  
          states that it is declaratory of existing law and does not limit  
          the CPUC's discretion in developing or adopting targets for an  
          LSE to procure viable and cost-effective energy storage systems.
          
          Background

          Law requires procurement of energy storage systems.  AB 2514  
          (Skinner, 2010) required the CPUC to determine appropriate  
          targets, if any, for LSEs to procure energy storage systems by  
          2015 and 2020.  The bill also directed POUs to set their own  
          comparable energy storage system procurement targets. 


          In October of 2013, the CPUC determined energy storage system  
          procurement targets applicable to the IOUs.  The CPUC set  
          interim and final targets for the state's largest IOUs - Pacific  
          Gas and Electric (PG&E), San Diego Gas and Electric (SDG&E) and  
          Southern California Edison (SCE) - that, in 2020, require the  
          three IOUs, together, to procure 1,325 megawatts of energy  
          storage. [See CPUC Decision 13-10-040.]  The CPUC decision,  
          while acknowledging that large pumped hydroelectric facilities  
          meet the statutory criteria provided AB 2514, explicitly  








                                                                      AB 33  
                                                                    Page  3



          excluded pumped hydroelectric storage facilities greater than 50  
          megawatts.  The CPUC justified this exclusion as follows:


               The sheer size of pumped storage projects would dwarf other  
               smaller, emerging technologies; and as such, would inhibit  
               the fulfillment of market transformation goals.  The  
               majority of pumped storage projects are 500 MW and over,  
               which means a single project could be used to reach each  
               target within a utility territory.  


          The CPUC, not unreasonably, concluded that an IOU could meet its  
          storage obligation through procurement of a single, large  
          pumped-storage project, thereby crowding out smaller, emerging  
          storage technologies.  Such an outcome, the CPUC concluded,  
          would contradict the goal of energy storage market  
          transformation.


          Many purposes of energy storage procurement targets. The CPUC  
          did not act unreasonably in concluding the energy storage goals  
          of AB 2514 included market transformation:  implicit in the  
          imposition of procurement targets is the goal of altering market  
          outcomes from what they would otherwise be.  However, whatever  
          its implicit goals, AB 2514 stated a number of explicit goals to  
          be achieved by the energy storage procurement program.   
          Large-scale pumped hydroelectric facilities, like smaller energy  
          storage systems using varying technologies, have the potential  
          to meet these statutory goals. 


          There is no obvious, compelling reason why the energy storage  
          procurement targets adopted by the CPUC must exclude pumped  
          hydroelectric storage facilities.  In any case, existing statute  
          already makes large pumped-storage eligible for the CPUC's  
          storage targets.  Therefore, this bill simply restates, with  
          emphasis, existing law.  


          The most recent amendments to the bill changed the bill language  
          as follows:








                                                                      AB 33  
                                                                    Page  4




               Beginning January 1, 2017, if the commission increases the  
               targets for a load-serving entity to procure viable and  
               cost-effective energy storage systems, pumped hydroelectric  
               storage facilities of any size that become operational on  
               or after January 1, 2017, shall be eligible  without limit   
               to the extent that those facilities meet otherwise  
               applicable requirements. 
          
          It is unclear what effect inclusion of the words "without limit"  
          had on the requirements of the bill, though some stakeholders  
          expressed concern with the terms ambiguous meaning.  Similarly,  
          it is unclear what effect, if any, removal those words has on  
          the requirements of the bill.
          
          Related/Prior Legislation
          
          SB 886 (Pavley, 2015) requires the CPUC to adopt energy storage  
          system procurement targets applicable to every LSE and the  
          governing board of each local publicly owned electric utility to  
          adopt comparable energy storage procurement targets; requires  
          each LSE and locally owned public electric utility to plan for  
          the procurement of energy storage systems before  
          fossil-fuel-based generation; and requires each electrical  
          corporation to propose measures to encourage customers to  
          install energy storage systems.  The bill passed the Senate  
          25-14 and is under consideration in the Assembly Committee on  
          Appropriations.

          AB 1258 (Skinner, 2013) would have required the CEC to perform a  
          technical analysis of the potential uses of existing  
          hydro-electric and pumped storage facilities to provide  
          additional operational flexibility to integrate eligible  
          renewable energy sources into the grid.  The bill was held in  
          Assembly Committee on Appropriations.
          
          AB 2514 (Skinner, Chapter 469, Statutes of 2010) required CPUC  
          to determine appropriate targets, if any, for LSEs to procure  
          energy storage systems.  The bill required LSEs to meet any  
          targets adopted by the CPUC by 2015 and 2020.  The bill required  
          POUs to set their own targets for the procurement of energy  
          storage and then meet those targets by 2016 and 2021. 








                                                                      AB 33  
                                                                    Page  5





          FISCAL EFFECT:   Appropriation:    No          Fiscal  
          Com.:YesLocal:   No


          SUPPORT:   (Verified7/27/16)


          Brookfield Renewable
          Clean Power Campaign
          EDF Renewable Energy
          Eagle Crest Energy, Inc.
          San Diego County Water Authority


          OPPOSITION:   (Verified7/27/16)


          None received

          ARGUMENTS IN SUPPORT:  According to the author:

            When CPUC implemented AB 2514 (Skinner, 2010) [D.13-10-040],  
            the CPUC elected to place an arbitrary restriction on what  
            types of energy storage would satisfy the procurement mandate.  
             It determined that any pumped hydroelectric storage project  
            over 50 megawatts in size would not qualify.  Unfortunately,  
            this means that large-scale pumped hydroelectric storage does  
            not satisfy any of the numerous requirements placed on IOUs.   
            Because it does not "check a box" for the utilities, there is  
            very little for a utility to procure it.  This is despite  
            pumped storage being cost-effective and important in helping  
            the state integrate additional renewable energy onto the grid.

            AB 33 allows IOUs to purchase pumped hydroelectric storage of  
            all sizes to meet in any future procurement mandate for energy  
            storage.  This is not a storage procurement mandate or an  
            increase to an existing procurement mandate.  AB 33 simply  
            ensures that pumped hydroelectric storage is not unnecessarily  
            excluded from future energy storage procurement mandates









                                                                      AB 33  
                                                                    Page  6




          Prepared by:Jay Dickenson / E., U., & C. / (916) 651-4107
          8/3/16 18:43:08
                                   ****  END  ****