BILL ANALYSIS Ó
AB 802
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Date of Hearing: April 27, 2015
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Anthony Rendon, Chair
AB 802
(Williams) - As Amended April 20, 2015
SUBJECT: Public utilities: energy efficiency savings
SUMMARY: This bill requires the California Public Utilities
Commission (CPUC) to modify its cost effectiveness evaluation
for energy efficiency savings. Specifically, this bill:
a)Declares the intent of the Legislature to enact legislation
requiring that all applicable state and federal contractor
qualifications, licensing, certifications, and wages
appropriate for the work to be performed are followed for any
energy efficiency retrofit and installation project funded by
ratepayers.
b)Requires the CPUC to consider total energy savings to be the
difference between the energy usage after the installation of
the energy efficiency measure funded by ratepayer-funded
incentives or rebates and the energy usage without that energy
efficiency measure.
EXISTING LAW:
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1)Establishes a charge on electricity and natural gas
consumption to fund cost-effective energy efficiency and
conservation activities. (Public Utilities Code Sections 381
and 890)
3)Requires electric corporation procurement plans to first meet
its unmet resource needs through all available energy
efficiency, and demand reduction resources that are cost
effective, reliable, and feasible. (Public Utilities Code
Sections 454.5 (b)(9)(C))
4)Requires the CPUC to establish targets for all potentially
achievable cost-effective electricity and gas efficiency
savings. (Public Utilities Code Sections 454.55 and 454.56)
5)Requires the California Energy Commission (CEC) to develop a
statewide estimate of all potentially achievable
cost-effective electricity and natural gas savings, establish
targets for statewide annual energy efficiency savings, and
demand reduction for the next 10-year period. (Public
Resources Code Section 25310)
6)Requires the CEC to adopt cost-effective energy and water
efficiency standards for new buildings and appliances.
(Public Resources Code Section 25402)
7)Prohibits the sale of new appliances that do not meet the
energy and water efficiency standards adopted by the CEC.
(Public Resources Code Section 25402(c)(2))
8)Requires the CEC to develop and implement a comprehensive
program to achieve greater energy savings in California's
existing residential and nonresidential building stock.
(Public Resources Code Section 25943)
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FISCAL EFFECT: Unknown.
COMMENTS:
1)Author's Statement. "Current policy leads to a large pool of
stranded energy efficiency savings potential because program
administrators can only target energy savings attributable to
the installation of equipment above current code levels. Under
this policy, bringing older buildings up to and eventually
beyond current code levels is difficult."
"Existing data demonstrates that to-code savings are
significantly larger than the above-code savings. Further, for
customers with inefficient equipment, poorly tuned buildings,
or behaviorally driven over-consumption, the incentive amount
investor owned utilities (IOUs) can offer isn't enough to
motivate the upgrades and changes in practice required, as the
portion of the costs for which no incentive is available may
be substantial. This results in deferred projects and stranded
savings potential."
"AB 802 will allow IOUs to provide incentives for improvements
from existing conditions and count all savings that show up at
the meter as decreased use, including savings achieved by
process changes and maintenance. Authorizing this flexibility
means California can take a significant step toward 2030
climate goals."
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2)Governor's 2015 Inaugural Address calls for Energy Efficiency.
In the Governor's Inaugural Address on January 5, 2015, he
stated in his comments on reducing carbon pollutions and
limiting greenhouse gas emissions:
"In fact, we are well on our way to meeting our AB 32 goal of
reducing carbon pollution and limiting the emissions of
heat-trapping gases to 431 million tons by 2020. But now, it
is time to establish our next set of objectives for 2030 and
beyond.
Toward that end, I propose three ambitious goals to be
accomplished within the next 15 years:
Increase from one-third to 50 percent our
electricity derived from renewable sources;
Reduce today's petroleum use in cars and trucks by
up to 50 percent;
Double the efficiency of existing buildings and make
heating fuels cleaner."
1)New Approach to Energy Efficiency Programs. The goal of the
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current ratepayer funded program is framed around an attempt
by the CPUC to preserve the use of ratepayer funding for those
energy efficiency improvements would be above and beyond that
which is naturally going to occur when consumers replace
appliances or make building improvements (from CPUC Decision
D.14-10-046):
Goal of ratepayer funded programs is to generate savings
above and beyond those that would happen organically, i.e.,
incremental savings, and lead customers to save energy in
ways that they would not have absent the incentive
Using a code baseline is one way to ensure that programs
do not pay for, and PAs are not devoting resources to
savings that would have occurred anyway, even without a
program
Customers are generally legally obliged to meet code
requirements when replacing a burned-out piece of
equipment, when engaging in a normal retrofit, and in new
construction
Use of code baseline harmonizes with the CEC and CAISO
energy demand forecast
This same CPUC decision (D.14-10-046) directs the IOUs to
implement a "to-code" pilot program to better understand the
extent to which there is below-code equipment that is not
getting replaced quickly enough through natural turnover or
existing programs. The pilot will assess whether
ratepayer-funded programs can be developed to target this
equipment when customer incentives are made available based on
to-code, in addition to above code, savings, and PAs receive
savings credit.
1)Studies show "stranded" energy efficiency opportunities . Two
recently completed studies in the PG&E service area found that
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the savings potential for bringing a building to current code
standards are higher than the potential savings from
above-code only programs. One study found that as much as 75%
of potential savings were stranded under current policies. The
second study found similar results: 71% of the total potential
electric savings, equating to 781 gigawatt hours (GWh), were
below-code, while the remainder was above-code.
Under the current code baseline rules, in most cases, investor
owned utilities (IOUs) can only offer an incentive for the
portion of savings that occurs from code to super-efficient.
This dynamic leads to perverse incentives in which the least
efficient schools may become stranded opportunities.
Pacific Gas & Electric (PG&E) found that this is particularly
challenging for schools receiving funding under Proposition
39, which also adopts the above-code approach to funding
energy efficiency improvements at schools: PG&E found through
a survey of existing site conditions at 19 schools conducted
in 2006 in PG&E's service territory that:
Two of the nineteen schools are more efficient than
code, while the remainder range from slightly less
efficient to significantly less efficient.
The least efficient schools are poor candidates for
investor owned utility programs because the majority of the
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savings potential cannot be counted or incented, leaving
these schools with a significant investment of their own
before they could benefit from incentive assistance.
1)Rate increase? The CPUC establishes the budgets for the
ratepayer funded incentive programs. The bill does not
require nor does it suggest an increase in those budgets, thus
a rate increase is unlikely if AB 802 becomes law. The CPUC
could incorporate the provisions of AB 802 into the existing
program portfolio and make decisions on reducing or de-funding
less productive programs.
2)Bonus Shareholder Incentive? Beginning in 2007 the CPUC
authorized a "risk reward incentive mechanism," which rewards
or penalizes utilities based on evaluated energy savings for
their performance administering energy efficiency programs.
Because AB 802 has the potential to produce significant
savings it could lead to a bonus in the incentive mechanism as
a result of the IOUs achieving greater levels of energy
efficiency. AB 802 does not require the CPUC to specify a
certain level of shareholder incentive for this program and
does not prescribe that the CPUC provide the same incentive as
if currently allowed. In fact, if the program authorized by
AB 802 is able to yield savings at a lower cost, it is logical
the CPUC could reduce the level of shareholder incentive that
it awards to the IOUs.
3)Legislative intent . AB 802 provides Legislative intent that
ratepayer funded energy efficiency projects are subject to all
applicable state and federal contractor qualifications,
licensing, certifications, and wages appropriate for the work
to be performed. This provision clarifies that the CPUC shall
ensure that the ratepayer funded programs that it authorizes
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shall follow these state rules however it is not clear who
would enforce the provisions of this section of the bill.
4)Support and opposition.
PG&E supports AB 802 but is concerned that the intent language
with respect to compliance with state laws could put PG&E in a
position of enforcing contractor qualifications, licensing,
certification and wages and that this could increase program
cost and reduce funding available for energy efficiency.
5)Related Legislation
AB 1330 (Bloom, 2015) establishes an energy efficiency
resources standard. Currently in Appropriations Committee.
AB 1094 (Williams) authorizes the California Energy Commission
to analyze energy consumption of plug in equipment and set
energy efficiency targets and require the CPUC to work with
the Energy Commission to address electricity consumption by
plug in equipment. Currently in Natural Resources Committee.
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REGISTERED SUPPORT / OPPOSITION:
Support
California State Association of electrical Workers
California State Pipe Trades Council
Western States Council of Sheet Metal Works
Coalition of California Utility Employees
PG&E (if amended)
Opposition
None on file
Analysis Prepared by:Sue Kateley / U. & C. / (916) 319-2083
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