BILL ANALYSIS Ó
AB 674
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Date of Hearing: May 27, 2015
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Jimmy Gomez, Chair
AB
674 (Mullin) - As Amended May 5, 2015
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| |Natural Resources | |8 - 1 |
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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
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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
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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.
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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.
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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.
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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