BILL ANALYSIS                                                                                                                                                                                                    Ó



          SENATE COMMITTEE ON ENERGY, UTILITIES AND COMMUNICATIONS
                              Senator Ben Hueso, Chair
                                2015 - 2016  Regular 

          Bill No:          AB 802            Hearing Date:    9/10/2015
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          |Author:    |Williams                                             |
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          |Version:   |9/4/2015    As Amended                               |
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          |Urgency:   |No                     |Fiscal:      |Yes             |
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          |Consultant:|Jay Dickenson                                        |
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          SUBJECT: Energy efficiency

           PURSUANT TO SENATE RULE 29.10 (c)
           
          DIGEST:    This bill addresses three distinct energy programs.   
          First, this bill expands the types and level of information the  
          California Energy Commission (CEC) may require to be submitted  
          to it and requires CEC to have reasonable policies and  
          procedures to protect customer information.  


          Second, this bill abolishes the existing CEC-administered "AB  
          1103" program of nonresidential building energy consumption  
          disclosure and replaces it with an energy use "benchmarking"  
          program for certain larger commercial and residential buildings.  
           


          Third, this bill requires the California Public Utilities  
          Commission (CPUC) to authorize electrical corporations or gas  
          corporations (IOUs) to provide incentives and assistance for  
          measures to conform a building to CEC's energy efficiency  
          standards for existing buildings and to allow IOUs to recover in  
          rates the reasonable costs of those incentives and assistance.


          ANALYSIS:
          
          Existing law:
          









          AB 802 (Williams)                                     PageB of?
          
          1)Requires the CEC biennially to conduct assessments and  
            forecasts of all aspects of energy industry supply,  
            production, transportation, delivery and distribution, demand,  
            and prices and to use these assessments and forecasts to  
            develop energy policies that conserve resources, protect the  
            environment, and protect public health and safety.  The CEC  
            publishes its assessments and forecasts every two years in its  
            Integrated Energy Policy Report (IEPR).  (Public Resources  
            Code §25301.)


          2)Requires each electrical and gas utility to maintain records  
            of the energy consumption of all nonresidential buildings to  
            which it provides service.  The utility must upload energy  
            consumption data to a database upon authorization of a  
            nonresidential building owner or operator.  The owner or  
            operator of a nonresidential building discloses the  
            benchmarking data and ratings for the building for the most  
            recent 12 months to a prospective buyer, lessee, or lender.   
            This is informally known as the "AB 1103" program.  (Public  
            Resources Code §25402.10.)



          3)Establishes a charge on electricity and natural gas  
            consumption to fund cost-effective energy efficiency and  
            conservation activities.  (Public Utilities Code §§381 and  
            890)


          1)Requires electrical corporation procurement plans to first  
            meet unmet resource needs through all available energy  
            efficiency, and demand reduction resources that are cost  
            effective, reliable, and feasible.  (Public Utilities Code  
            §§454.5 (b)(9)(C)) 



          4)Requires the CPUC to identify all potentially achievable  
            cost-effective electricity and natural gas efficiency savings  
            and to establish energy efficiency procurement targets and  
            ratepayer-funded programs for IOUs.  Requires a gas  
            corporation to first meet its unmet resource needs through all  
            available natural gas efficiency and demand reduction  
            resources that are cost effective, reliable, and feasible.   









          AB 802 (Williams)                                     PageC of?
          
            (Public Utilities Code §§454.55 and 454.56.)

          2)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 §25943)

          This bill:

          Regarding CEC data collection and forecasts:


          1)Expands the types of  information the CEC, as part of its  
            biennial energy industry assessments and forecasts, may  
            require to be submitted to it to include individual customer  
            historic electric or gas service usage, or both, and  
            individual customer historic billing data, in a format and  
            level of granularity specified by the CEC.


          2)Requires the CEC to maintain reasonable policies and  
            procedures to protect customer information from unauthorized  
            disclosure.


          3)Directs the CEC, in consultation with the CPUC, to make all  
            reasonable adjustments to it energy demand forecasts to  
            account for its findings of market conditions and existing  
            baselines. 


          Regarding benchmarking:


          4)States that building owner should have access to their  
            buildings' energy use to improve building management and  
            investment decisions.


          5)States the intent of the Legislature that the CEC create a  
            benchmarking and disclosure program through which owners of  
            commercial and multifamily buildings above 50,0000 square feet  
            in gross floor area better understand their energy consumption  
            through standardized metrics.










          AB 802 (Williams)                                     PageD of?
          

          6)Abolishes the "AB 1103" program of nonresidential energy use  
            disclosure, administered by the CEC.


          7)Creates a new energy use benchmarking program for "covered  
            buildings," meaning (a) any building with no residential  
            utility accounts, or (b) any building with five or more active  
            utility accounts, residential or nonresidential.


          8)Beginning January 1, 2016, requires a utility that sells  
            electricity, natural gas, steam, or fuel oil to a customer for  
            end uses addressed by the United States Environmental  
            Protection Agency's (US EPA's) ENERGY STAR Portfolio Manager  
            system to maintain records for 12 calendar months of the  
            energy usage data of all buildings to which they provide  
            service.


          9)Beginning January 1, 2017, requires a utility to provide  
            aggregated energy usage data to the owner or operator of a  
            covered building, within four weeks of the owner or operator's  
            request, subject to the following requirements:


               a.     For a covered building with three or more active  
                 utility accounts, the utility shall deliver the  
                 aggregated energy usage data for all utility customers in  
                 the same building for each of the prior 12 months, at a  
                 monthly level unless otherwise specified by CEC.  The  
                 aggregated energy usage data shall not be deemed customer  
                 utility usage information or confidential information by  
                 the utility for purposes of delivery.  The building owner  
                 and utility shall not have any liability for any use or  
                 disclosure of aggregated usage information delivered in  
                 keeping with the bill's requirements.


               b.     For all other covered buildings, the utility shall  
                 deliver aggregated energy usage data for all utility  
                 customers in a given building for each of the prior 12  
                 month, at a monthly level unless otherwise specified by  
                 CEC,  only if the accountholder provides written or  
                 electronic consent to the building owner or operator.









          AB 802 (Williams)                                     PageE of?
          


            10) Authorizes CEC to specify additional information a utility  
              must deliver to allow an owner or operator of a covered  
              building to complete energy use benchmarking.  


            11) Declares the building owner and utility shall not have  
              liability for any use or disclosure by others of usage  
              information delivered as required by this bill.


            12) Directs CEC to adopt regulations governing the delivery to  
              CEC of benchmarking results, which are distinct from  
              aggregate energy usage data, and for the public disclosure  
              of the benchmarking results, and authorizes CEC, in adopting  
              the regulations, to make a number of determinations,  
              including additional covered buildings not subject to the  
              public disclosure requirement and categories of data that  
              are protected from release under existing laws.


            13) States that CEC's regulations governing delivery and  
              public disclosure of benchmarking results shall not require  
              an owner of a building with 16 or fewer residential utility  
              accounts to collect or deliver usage information to the CEC  
              for public disclosure.


            14) States that the reasonable cost of an IOU to deliver  
              information as required by this bill are recoverable in  
              rates.


            15) States that the reasonable costs of a local publicly owned  
              utility in disclosing electrical usage data pursuant to this  
              bill may be considered "cost-effective demand-side  
              management services to promote energy efficiency and energy  
              conservation" and thereby reimbursable by the utility's  
              general fund.


          Regarding energy efficiency measures for existing buildings:











          AB 802 (Williams)                                     PageF of?
          
            16) Requires the CPUC, by September 1, 2016, to authorize an  
              IOU to provide incentives for the cost of energy efficiency  
              programs based on all estimated energy savings, including  
              energy savings from bringing existing buildings into  
              compliance with mandatory energy efficiency codes for  
              existing buildings issued by the CEC, and authorizes an IOU  
              to recover the costs in rates.  States that the energy  
              efficiency measures described above may include savings and  
              reductions from measures to conform a building with existing  
              energy efficiency regulation, as well as certain  
              operational, behavioral, and retrocommissioning activities.


            17) States that the CPUC may adjust the energy efficiency  
              procurement targets to reflect energy efficiency savings  
              achieved in meeting or exceeding mandatory energy efficiency  
              codes for existing buildings.


            18) Authorizes the IOUs, effective January 1, 2016, to provide  
              the financial incentives and assistance described above for  
              "high opportunity projects or programs."


          Background I - CEC's IEPR

          CEC assessments and forecast:  expanded authority.  Statute  
          requires CEC to prepare a biennial integrated energy policy  
          report, known as the IEPR, that contains an assessment and  
          forecast of major energy trends and issues facing the state's  
          electricity, natural gas and transportation fuel sectors.   
          Statute directs the CEC to use the IEPR assessments and  
          forecasts to develop energy policies that conserve resources,  
          protect the environment, ensure reliable, secure, and diverse  
          energy supplies, enhance the state's economy and protect public  
          health and safety.  

          Statute provides CEC with broad authority to require the  
          submission of various types of  information to enable it to  
          perform the assessments and forecasts that comprise the IEPR.   
          Statute specifically authorizes CEC to require submission of  
          demand forecasts, resource plans, market assessments, and  
          related outlooks.  This bill expands the specific types of  
          information CEC may compel entities to provide it to include  
          individual customer historic electric or gas service usage, or  









          AB 802 (Williams)                                     PageG of?
          
          both, and individual customer historic billing data, in a format  
          and level of granularity specified by the commission.  This bill  
          also expands the CEC IEPR responsibilities to include the  
          development and evaluation of energy policies and programs.   
          Finally, this bill directs CEC to maintain reasonable policies  
          and procedures to protect customer information from unauthorized  
          disclosure.

          Background II - Energy Usage Benchmarking and Public Disclosure

          Death to benchmarking.  Long live benchmarking.  Benchmarking  
          compares the energy consumption per square foot of floor space  
          for comparable classes of buildings.  It is a tool for  
          understanding the relative energy efficiency of buildings.  

          Under current law, CEC administers the Nonresidential Building  
          Energy Use Program, a benchmarking and public disclosure program  
          more commonly known as the AB 1103 program. Under this program,  
          an owner or operator of a large commercial building must  
          disclose energy consumption data to a prospective buyer, lessee  
          or lender.  IOUs are required to maintain and disclose the  
          necessary data for the rankings by uploading it to the US EPA's  
          ENERGY STAR Portfolio Manager. 

          This bill replaces the AB 1103 program with a new energy use  
          benchmarking and public disclosure program.  Under this new  
          program, a utility must maintain energy usage data for all  
          buildings to which it provides service for at least the most  
          recent 12 complete calendar months.  The utility would need to  
          provide the benchmark data to a building owner or operator  
          within four weeks of request, and the CEC would develop  
          regulations to govern delivery of benchmark data to the  
          commission and the public disclosure of such data.  This bill  
          includes language that states the intent of the Legislature that  
          the CEC create a benchmarking and disclosure program through  
          which owners of commercial and multifamily buildings 50,000  
          square feet and larger will better understand their energy  
          consumption through standardized energy use metrics.

          The CEC acknowledges that the AB 1103 program has been less than  
          successful.  It has delayed program implementation repeatedly.  
          In justifying its most recent delay of the program, the CEC  












          AB 802 (Williams)                                     PageH of?
          
          cited the following "substantial barriers" to program  
          success<1>: 
                 Technical difficulties in the roll-out of the US EPA's  
               ENERGY STAR Portfolio Manager platform and software. 
                 Ambiguity about when public disclosure of energy usage  
               data.
                 Infrequency of public disclosure of energy usage data.
                 Utilities and electric service providers requiring  
               tenant consent before releasing required energy use data to  
               building owners, causing delay and increasing transaction  
               costs.
                 Reported inability of smaller utilities to process  
               necessary program information.
                 Resistance to the requirements of program regulations.

          The benchmarking program in this bill differs from the AB 1103  
          program in several significant ways that potentially improve the  
          program.  Specifically, this bill:
                 Explicitly directs each utility to maintain energy use  
               data for all buildings to which it provides service and to  
               promptly provide the data to owners of covered buildings,  
               upon request.
                 Expands the benchmarking program to cover all commercial  
               and residential buildings.
                 Relieves owners of smaller buildings by focusing the  
               benchmarking program on buildings larger than 50,000 square  
               feet gross floor area (at least, as expressed in this  
               bill's intent language but, curiously, not in the codified  
               sections of this bill).
                 Allows CEC to specify in regulations when public  
               disclosure of benchmarking results is to occur, thereby  
               removing ambiguity about the timing of disclosure  
               requirements.

          Privacy concerns.  Some entities, including the California  
          Municipal Utilities Association (CMUA) and Northern California  
          Power Association (NCPA), express concern with explicitly  
          authorizing CEC to compel utilities and others to share  
          individual energy use data, and at a format and level specified  
          by CEC.  These entities contend that customer energy usage data  
          ---------------------------
          <1>  
           http://www.energy.ca.gov/ab1103/notices/2014-07-22_Notice_to_Cons 
          ider_Adoption_Emergency_Regs_1682c_and_11346-1_on_July_22_2014.pd 
          f  









          AB 802 (Williams)                                     PageI of?
          
          belongs to the customer and that the customer should decide who  
          receives such data.

          This bill includes numerous provisions to protect customer data.  
           For example, in regards to CEC's energy industry assessments  
          and forecasts, this bill requires utilities and others to share  
          individual customer historic energy usage and billing data only  
          with CEC, and this bill requires CEC to maintain reasonable  
          policies and procedures to protect customer information from  
          unauthorized disclosure.  

          This bill also seeks to prevent the release of customer usage  
          data for benchmarking purposes.  The bill requires utilities to  
          release aggregate energy usage data only to the owner of a  
          covered building upon request.  This bill limits this reporting  
          mandate to commercial buildings with three or more active  
          utility accounts and residential buildings with five or more  
          active utility accounts.  In most conceivable cases, it would be  
          somewhat difficult or impossible for a third party to glean much  
          about an individual tenant's energy use by reference to the  
          energy usage data provided to a building owner.  This is because  
          the data is, as mentioned, in the aggregate for all of a  
          building's tenants and covering a year in twelve monthly  
          increments, and the utility will not provide individual tenant  
          energy usage data to the owner of a covered building without the  
          tenant's permission.  What's more, many building owners have  
          access to the electric and gas meters of their tenants in any  
          case.

          Similarly, this bill's provisions regarding public disclosure of  
          benchmarking results seek to protect individual customer data.   
          This bill prohibits the CEC from requiring the owner of a  
          building with 16 or fewer residential utility accounts to  
          collect or deliver energy usage information data to CEC for  
          public disclosure.  This bill also authorizes CEC to identify  
          additional covered building types that are not subject to the  
          public disclosure requirement.  And the CEC is subject, as this  
          bill notes, to the confidentiality and other requirements of the  
          Public Records Act, Information Practices Act and other laws  
          protecting privacy and confidentiality.

          Despite these protections, it may be possible to learn something  
          of an individual tenant based on aggregated customer energy  
          usage.  As an illustration, NCPA describes a large building with  
          three commercial tenants, two of which are very small.  Some of  









          AB 802 (Williams)                                     PageJ of?
          
          NCPA's member utilities report of industrial customers who are  
          very protective of their industrial data.  Such customers  
          imagine a rival discerning business activity, such as an  
          upcoming product release, based upon an increase in a building's  
          aggregate energy use over the course of a month.  Of course,  
          statute prevents a building owner from disclosing such data to a  
          third party.  (See California Civil Code §1798.98.)  However,  
          such information might be quite valuable, and disclosure could  
          happen, legal prohibition notwithstanding.  

          In addition, this bill explicitly authorizes CEC to require  
          utilities to make covered building usage data aggregated at a  
          sub-monthly level.  Were the CEC to do so, such frequent  
          interval energy usage data could be quite revealing indeed.  And  
          even the requirement that CEC maintain reasonable policies and  
          procedures to protect customer information provides only so much  
          comfort:  no one, the CEC included, is immune to cyber theft,  
          especially of the sophisticated kind.

          Drafting error?  According to the author, the current version of  
          this bill includes a drafting error in Public Resources Code  
          §25401.10 (d)(1):  there should  be a period after the word   
          "commission;" however, this bill erroneously includes the words  
          "for public disclosure" after the word "commission."  The  
          effect, if any, of inclusion of these three words is unclear.    
          It seems, and the author reports his intent that, the addition  
          of "for public disclosure" does not imply that the owner of a  
          building with 16 or fewer utility accounts may be required to  
          deliver usage information to the CEC if used for a purpose other  
          than public disclosure.  In any case, the committee may wish to  
          amend this bill as follows:

               Public Resources Code §25401.10(d)(1)
               This subdivision shall not require the owner of a building  
               with 16 or fewer residential utility accounts to collect or  
               deliver usage information to the commission  for public  
               disclosure  .

          Many terms, few meanings? This bill's benchmarking provisions  
          seem to use different terms for the same concepts.  For example,  
          this bill uses the following similar terms:
                 Aggregated customer information.
                 Aggregated energy usage data.
                 Aggregated energy usage. 
                 Aggregated usage information.









          AB 802 (Williams)                                     PageK of?
          
                 Benchmarking of the energy use. 
                 Benchmarking results.
                 Energy usage data.
                 Usage data.

          According to the author, the following groups of terms have  
          equivalent meanings, as used in this bill:
                 Aggregated customer information; aggregated energy usage  
               data; aggregated energy usage; aggregated usage  
               information.
                 Benchmarking of the energy use; benchmarking results.
                 Energy usage data; usage data.

          The committee may wish to amend this bill to make consistent use  
          of these terms.

          Background III - Energy Efficiency of Existing Buildings

          Energy efficiency atop the load.  The "loading order" guides the  
          state's energy policies and decisions according to the following  
          order of priority:  (1) decreasing energy demand by increasing  
          energy efficiency; (2) responding to energy demand by reducing  
          energy usage during peak hours; (3) meeting new energy  
          generation needs with renewable resources; and (4) meeting new  
          energy generation needs with clean fossil-fueled generation.   
          This policy has been adopted by the energy agencies - the CEC  
                                                                              and CPUC - and its principles guide all energy programs.

          Consistent with the loading order, statute requires both  
          electrical and gas IOUs to meet unmet resource needs with all  
          available energy efficiency and demand reduction that is  
          cost-effective, reliable and feasible.  The CPUC uses these  
          criteria to establish energy efficiency targets for the IOUs.   
          To achieve these targets, the IOUs (and, in some cases,  
          community choice aggregators) administer energy efficiency  
          programs with ratepayer funds approved by the CPUC.   Currently  
          funded at about $1 billion per year, the programs include a  
          portfolio of financial incentives, loans, and rebates for  
          installing energy efficient appliances, lighting, windows, HVAC  
          systems, whole-house retrofits, and sector-specific efforts.  

          Setting the bar high.  According to existing CPUC rules, each  
          IOU claims credit for energy savings from the portfolio of  
          energy efficiency measures in its energy efficiency program.   
          The CPUC evaluates the claimed energy savings and, after  









          AB 802 (Williams)                                     PageL of?
          
          adjustment, authorizes financial rewards for the IOU.  

          The CPUC measures claimed savings against a baseline, which the  
          CPUC generally defines as being comprised of three factors:  (1)  
          "naturally occurring savings," (2) standard industry practice  
          and (3) the CEC's Title 24 energy efficiency standards for  
          existing buildings.  The CPUC sets the baseline at this level to  
          avoid "free ridership," that is, credit for energy savings that  
          would have occurred absent the IOUs' energy efficiency programs.  
           Currently, the CPUC assumes that measures to bring an existing  
          building into compliance with CEC's energy efficiency standards  
          would have occurred absent the IOUs' energy efficiency programs.  
           (See figure below.)  























          Recently, some parties have complained that the CPUC-established  
          baseline of energy efficiency measures prevents realization of  
          additional, cost-effective energy savings.  This is because the  
          baseline prevents the IOUs from receiving ratepayer monies for  
          encouraging energy-saving building measures that fall below  
          CEC's energy efficiency building standards.  In fact, Pacific  
          Gas and Electric (PG&E) reports the results of two studies -  
          both commissioned by PG&E and, as yet, not reviewed by an  
          independent third party - that show that most potential  









          AB 802 (Williams)                                     PageM of?
          
          cost-effective energy efficiency savings are represented by  
          projects that are below the CEC's building code standards.   
          PG&E, and others, contend that the state will not be able to  
          attain the ambitious energy efficiency goals currently  
          contemplated by the Legislature unless the CPUC credits the IOUs  
          with the energy savings that result from below-code projects.   
          Proponents additionally contend that the most cost-effective  
          energy efficiency projects are those below the energy efficiency  
          building standards.

          High opportunity projects or programs.  This bill authorizes  
          IOUs, effective January 1, 2016, to provide financial incentives  
          and other assistance for below-code high opportunity projects or  
          programs.  This bill directs the CPUC to provide expedited  
          authorization of high opportunity projects and programs to apply  
          the savings baseline provisions in subdivision.  This bill,  
          however, does not define or further describe high opportunity  
          projects and programs.

          Related Legislation
          
          AB 1094 (Williams, 2015) authorizes the CEC to analyze energy  
          consumption of plug-in equipment and set energy efficiency  
          targets and require the CPUC to work with the CEC to address  
          electricity consumption by plug-in equipment.  The bill was held  
          in the Assembly Committee on Appropriations.

          SB 350 (De León, 2015) enacts the Clean Energy and Pollution  
          Reduction Act of 2015.  The bill is currently under  
          consideration by the Assembly Floor.

          AB 531 (Saldana, Chapter 323, Statutes of 2009) gave the CEC  
          authority to set a schedule for compliance with the requirements  
          of AB 1103.

          AB 1103 (Saldana, Chapter 533, Statutes of 2007) required  
          electricity and gas utilities to maintain records of the energy  
          consumption of all nonresidential buildings to which they  
          provide service and to upload energy consumption data to US EPA  
          ENERGY STAR Portfolio Manager upon authorization of a  
          nonresidential building owner or operator.  The bill also  
          required the owner or operator of a nonresidential building to  
          disclose the Portfolio Manager benchmarking data and ratings for  
          the building for the most recent 12 months to a prospective  
          buyer, lessee, or lender.









          AB 802 (Williams)                                     PageN of?
          

          FISCAL EFFECT:                 Appropriation:  No    Fiscal  
          Com.:             Yes          Local:          No   


            SUPPORT:  

          Bay Area Regional Energy Network
          Building Owners and Managers Association of California
          California Building Industry Association
          California Business Properties Association
          California Energy Efficiency Industry Council
          California Housing Partnership Corporation
          California State Association of Electrical Workers
          California State Council of Laborers
          California State Pipe Trades Council
          Center for Sustainable Energy
          City of Berkeley Mayor, Tom Bates
          Coalition of California Utility Employees
          Commercial Real Estate Development Association
          EnerNOC, Inc.
          Institute of Heating & Air Conditioning Industries, Inc.
          Institute of Market Transformation
          International Council of Shopping Centers
          Mission:data Coalition
          National Association of Energy Service companies
          Natural Resources Defense Council
          Pacific Gas and Electric Company
          San Diego Gas & Electric Company
          Sempra Energy Utilities
          Southern California Edison
          Southern California Gas
          TechNet
          The Utility Reform Network
          Union of Concerned Scientists
          Western States Council of Sheet Metal Workers

          OPPOSITION:

          California Municipal Utilities Association

          ARGUMENTS IN SUPPORT:    The author and proponents contend the  
          benchmarking program created by this bill will allow for better  
          management of building energy efficiency.  PG&E, Sempra Energy  
          Utilities and Southern California Gas and Electric write in  









          AB 802 (Williams)                                     PageO of?
          
          support of the energy efficiency components of this bill,  
          contending the state will be unable to achieve its energy  
          efficiency goals unless the IOUs are able to provide incentives  
          and receive credit for projects to bring existing buildings up  
          to the CEC's energy efficiency standards for existing buildings.

          ARGUMENTS IN OPPOSITION:    The CMUA expresses opposition to the  
          benchmarking provisions of this bill, which CMUA describe as  
          violating the customer's ownership right of energy use  
          information.

          

                                      -- END --