BILL ANALYSIS                                                                                                                                                                                                    Ó



          SENATE COMMITTEE ON APPROPRIATIONS
                             Senator Ricardo Lara, Chair
                            2015 - 2016  Regular  Session

          AB 802 (Williams) - Public utilities: energy efficiency savings.
          
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          |Version: September 4, 2015      |Policy Vote: E., U., & C. 8 - 2 |
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          |Urgency: No                     |Mandate: No                     |
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          |Hearing Date: September 10,     |Consultant: Marie Liu           |
          |2015                            |                                |
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          This bill meets the criteria for referral to the Suspense File. 


          Bill  
          Summary:  AB 802 would: (1) expand the information the  
          California Energy Commission (CEC) may collect for the purpose  
          of its energy industry assessments and forecasts; (2) change the  
          disclosure requirements for building energy consumption to  
          create a "benchmarking" program; and (3) require the California  
          Public Utilities Commission (CPUC) to authorize an electrical or  
          gas corporation to recover in rates financial incentives and  
          support given for energy efficiency projects to bring an  
          existing building into conformity with Title 24 building code  
          standards or that produce multiyear savings.


          Fiscal  
          Impact:  
           Ongoing costs of $1.7 million to the Energy Resources Program  
            Account (General Fund) for additional workload and contracts  
            to implement the new benchmarking program and to incorporate  
            additional energy efficiency information into the CEC's  







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            assessments and forecasts.
           Unknown costs, but at least $900,000 to the Public Utilities  
            Reimbursement Account (special), for additional staff at the  
            CPUC to oversee, evaluate, and review the energy efficiency  
            program and to provide an expedited authorization of high  
            opportunity projects.
           Unknown costs, but potentially in the millions of dollars, to  
            the General Fund and various special funds to the state as a  
            ratepayer of investor-owned utilities for additional energy  
            efficiency program costs.


          Background:  Existing law requires the CEC to prepare a biennial integrated  
          energy policy report (IEPR) that contains an assessment and  
          forecast of major energy trends and issues facing the state's  
          electricity, natural gas, and transportation fuel sectors. This  
          report is used to develop energy policies. To develop the IEPR,  
          existing law gives the CEC broad authority to require the  
          submission of various types of information to obtain the  
          necessary data for it to perform the assessments and forecasts  
          necessary.
          Existing law establishes a benchmarking and public disclosure  
          program, known as the "AB 1103 program," whereby a commercial  
          building owner must disclose energy consumption data provided by  
          the utility to a prospective buyer, lessee, or lender.


          Existing law requires that the state's energy needs first be met  
          by increasing energy efficiency under the "loading order."  
          Consistent with the loading order, existing law requires  
          electric and gas investor-owned utilities (IOUs) to meet unmet  
          resources with all available energy efficiency and demand  
          reduction that is cost-effective, reliable, and feasible. To  
          achieve these targets, the IOUs administer energy efficiency  
          programs with ratepayer funds approved by the CPUC. Currently,  
          ratepayers pay for approximately $1 billion for financial  
          incentives, loans, and rebates for installing energy efficient  
          appliances, lighting, windows, HVAC systems, whole-house  
          retrofits, and sector-specific efforts.


          Under the CPUC's existing rules, the IOU's energy savings is  
          calculated against a baseline, which is based on (1) "natural  
          occurring savings," (2) standard industry practice, and (3)  








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          Title 24 energy efficiency standards for existing buildings.  
          Thus, when the energy efficiency project involves an existing  
          building, the actual energy efficiency savings could actually be  
          higher, perhaps substantially higher, than the savings over the  
          baseline.


          Title 24 of the California Code of Regulations establishes  
          building standards for energy efficiency. They were first  
          adopted in 1978 and are currently updated approximately every  
          three years. The standards are developed by the CEC and are  
          applied when a building permit is issued. 




          Proposed Law:  
            This bill has three main sections. First, this bill would  
          expand the types of information that the CEC can require to be  
          submitted to it as necessary for the purpose of developing the  
          IPER. The CEC would be required to maintain policies and  
          procedures to protect consumer information from authorized  
          disclosure of the information it receives.
          Second, this bill would change the requirements for the  
          reporting of energy consumption data for the purpose of  
          establishing benchmarks. Specifically, this bill would repeal  
          the AB 1103 program and instead would direct the CEC to adopt  
          regulations to require the utilities to provide energy usage  
          information for covered buildings to the building owner or to  
          the CEC for public disclosure. Covered buildings would mean a  
          building with no residential utility accounts or five or more  
          active utility accounts, residential or nonresidential. The  
          regulations would cover situations in which the benchmarking  
          results can be publically disclosed. The cost to the utility to  
          deliver usage data would be recoverable from the ratepayers. The  
          CEC would be authorized, but not required, to also adopt  
          regulations regarding how an owner of a non-covered building can  
          receive customer usage data, either aggregated or on an  
          individual basis. 


          Third, this bill would additionally require the CPUC in a  
          separate or existing proceeding, by September 1, 2016, to  
          authorize an electrical or gas corporation to recover in rates  








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          the costs from financial incentives and support given to  
          customers to increase the energy efficiency of existing  
          buildings based on all estimated energy savings and energy usage  
          reductions, including those savings or reductions that are a  
          result of brining an existing building into compliance with the  
          requirements of Title 24 building code standards, and activities  
          that are expected to produce multiyear savings. The utilities'  
          costs to provide such incentives and supports would.be  
          recoverable from the ratepayers. The CPUC would be explicitly  
          authorized to adjust energy efficiency goals or targets as a  
          result of this change. 


          This bill would also authorize electrical and gas utilities to  
          implement financial incentives for "high opportunity projects or  
          programs" effective January 1, 2016 with "expedited  
          authorization" from the CPUC.  




          Staff  
          Comments: To create the new benchmarking reporting program by  
          this bill, the CEC estimates that it would need 3 PYs at a cost  
          of $473,000 and a $500,000 contract ongoing. Additionally, this  
          bill would require the CEC to dramatically increase the amount  
          of information that can be incorporated into the state's  
          forecasting and assessments, including the IEPR report. At this  
          time, the CEC estimate that it will need 5 PYs ongoing at an  
          annual cost of $734,000. 
          Staff notes that this bill would eliminate the AB 1103 program,  
          which should create savings to offset the costs of the new  
          benchmarking program. However, the CEC never received positions  
          to implement the AB 1103 program and has been using redirected  
          positions. Therefore, the CEC does not anticipate any savings  
          from the elimination of the program.


          This bill will also result in new costs to the CPUC to oversee,  
          and potentially approve ratepayer funding for, a large number  
          energy efficiency projects that bring existing buildings up to  
          existing building standards codes that would be allowed as a  
          result of this bill. Currently, the CPUC oversees an annual  
          energy efficiency budget of approximately $1 billion. Allowing  








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          below-code projects will very conservatively increase this  
          budget by 50%. The CPUC estimates that such an increase in the  
          energy efficiency program budget will necessitate a minimum of  
          seven new positions at an ongoing annual cost of $900,000.The  
          new positions would be required to alter many of its documents,  
          databases, and studies that are used to guide energy efficiency  
          policy within the CPUC. Additionally, the CPUC anticipates  
          needing to review a large number of new efficiency pilot  
          programs. Staff notes that recent amendments delete a provision  
          a provision that stated the CPUC is not required to increase  
          funding for energy efficiency programs as a result of the bill.  
          Thus increases to the energy efficiency budget can be reasonably  
          expected should this bill pass. 


          This bill also requires the CPUC to provide "expedited  
          authorization" of "high opportunity projects." These are  
          undefined terms. Depending on how the CPUC intends on  
          implementing an expedited authorization process, it may have  
          additional costs. 


          The state is a ratepayer of electricity and gas. To the extent  
          that the additional energy efficiency budget results in  
          increased ratepayer costs, this bill would have additional costs  
          to the state. These costs are unknown and would depend on the  
          extent to which the CPUC approves ratepayer funds to be used for  
          energy efficiency projects that bring existing building up to  
          code. Billions of dollars are currently being spent to bring  
          existing buildings up to code as a result of natural equipment  
          turnover and building renovations. Furthermore, the benchmarking  
          disclosures in this bill are expected to dramatically increase  
          interest in "to-code" projects as well as availability of  
          non-ratepayer financing of those projects. Making ratepayer  
          funds available for these efficiency projects are likely to  
          supplant private investments that may otherwise occur on the  
          natural.  Staff notes that it is unclear how the CPUC will  
          determine whether the energy savings achieved through the  
          authorized programs will count toward a IOU's goals and targets,  
          and therefore are should be paid by the ratepayers. 












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