BILL ANALYSIS Ó AB 674 Page 1 Date of Hearing: May 27, 2015 ASSEMBLY COMMITTEE ON APPROPRIATIONS Jimmy Gomez, Chair AB 674 (Mullin) - As Amended May 5, 2015 ----------------------------------------------------------------- |Policy |Utilities and Commerce |Vote:|10 - 4 | |Committee: | | | | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | |Natural Resources | |8 - 1 | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | | | | | | | | | | | | | | | ----------------------------------------------------------------- Urgency: No State Mandated Local Program: YesReimbursable: No SUMMARY: This bill exempts customers served by clean distributed energy sources from nonbypassable charges imposed on investor-owned utility (IOU) customers to fund public purpose programs, energy AB 674 Page 2 crisis contracts and nuclear decommissioning costs. Specifically, this bill: 1)Defines "clean distributed energy resource" as a generation facility located on the customer site, up to 20 MW, sized to meet the customer's electrical demand, and that either: a) Uses non-renewable fuel (e.g., natural gas), produces GHG emissions less than the average emissions rate for delivered electricity in the same service territory and produces de minimis emissions of oxides of nitrogen (NOx) and sulfur oxides (SOx). b) Is an eligible renewable energy resource pursuant to the Renewables Portfolio Standard (RPS) not otherwise addressed in the PUC's implementation of a distribution resources plan or net energy metering. 1)Requires the PUC, to the extent authorized by federal law and by July 1, 2016, to require electrical corporations to modify rate plans for those customers served by clean distributed energy resources installed after January 1, 2016, to reflect the following: a) Nonbypassable charges are based on the actual metered consumption of electricity delivered to the customer through the electrical corporation's transmission or distribution system. All other charges are assessed at the same rate as other customers who do not use clean distributed energy resources. The calculated total amount AB 674 Page 3 of forgone nonbypassable charges must be fully recovered from ratepayers in the same customer class. b) Initial reservation capacity is based on a minimum of 12 months of the clean distributed energy resource generation technology's historical operation, the number, size, and outage diversity of resource, and the annual average reduction of customer load that could occur during an outage. The calculation of actual annual reservation capacity excludes the customer's use of electricity within 24 hours after an outage as specified. c) Electrical corporations may adjust standby demand charges and modify reservation capacities as specified 2)Requires the California Energy Commission (CEC) to provide a report to the Legislature on the impacts of these provisions as specified. Requires a clean distributed energy resource to provide relevant data upon request to CEC and the State Air Resources Board, and subjects the resource to onsite inspections as specified. FISCAL EFFECT: 1)Unknown cost shifts among ratepayers within the same customer class. Cost shifts may be offset by overall rate reductions (special funds). This issue is a matter of debate between the proponents and opponents of this bill. Proponents, such as Bloom Energy, point to a study by the Aspen Environmental Group that compared potential cost-savings to potential cost shifts. The study found, from 2010 through 2013, distributed generation would have provided enough economic benefit to other ratepayers to more than offset the value of the shifted utility fees. AB 674 Page 4 Opponents, such as Pacific Gas and Electric Company (PG&E), assert the study is flawed and failed to capture the complexity involved in the determination of energy prices. 2)Increased contract costs of $450,000 (GF or special fund) in fiscal year 2018-19 for CEC to prepare the report to the Legislature. 3) Absorbable PUC costs. COMMENTS: 1)Purpose. According to the author, customers who choose to invest their own capital to install clean distributed generation (DG) technologies must pay a number of utility-imposed fees on the electricity they generate and consume onsite. The author states these charges are equivalent to accessing an additional 75% to 100% sales tax on clean DG equipment and make the installation of such equipment prohibitively expensive and infeasible for residential, commercial and industrial customers. According to the author, by exempting onsite clean DG from nonbypassabe charges, this bill will enable more customers to invest their own capital to purchase clean, onsite electricity generation technologies that improve air quality, reduce energy costs for ratepayers, improve energy reliability, and reduce California's reliance on centralized, fossil-fueled power plants. AB 674 Page 5 2)Background. IOUs are required to collect nonbypassable charges to fund common system benefits and costs. The largest component of the charges affected by this bill is the public purpose program charge, which funds state-mandated low-income assistance, energy efficiency programs, and Electric Program Investment Charge (EPIC), which funds energy technologies and research. Smaller components are the Department of Water Resources (DWR) bond charge, which recovers the cost of bonds issued to finance power during the energy crisis, and site restoration associated with nuclear decommissioning. Some customer generation is exempt from nonbypassable charges through existing programs, depending on the install date, technology, and size. For example, solar projects eligible for NEM pay nonbypassable charges only on net consumption, though NEM is only applicable up to 1 MW in most cases. There is no such existing exemption for the renewable and non-renewable projects up to 20MW included in this bill. 3)Support and Opposition. This bill is supported by dozens of clean energy technology companies and other companies interested in onsite distributed generation. According to supporters, this bill removes utility-imposed fees charged to customers of clean distributed generation for energy generated and consumed on-site, and instead requires them to pay all applicable fees based only on electricity purchased from a utility through the grid. AB 674 Page 6 This bill is opposed by IOUs and ratepayer advocates. According to the Office of Ratepayer this bill unfairly burdens other utility customers with paying for the resulting revenue shortfall. It would also set a precedent for other customers groups to seek similar exemptions to nonbypassable charges. PG&E opposes this bill asserting it increases rates for some customers for the benefit of others. San Diego Gas and Electric (SDG&E) is opposed to legislative mandates that restrict the ability of the PUC to design and set rates. Southern California Edison (SCE) raises similar concerns. Analysis Prepared by:Jennifer Galehouse / APPR. / (916) 319-2081