BILL ANALYSIS Ó SENATE COMMITTEE ON APPROPRIATIONS Senator Ricardo Lara, Chair 2015 - 2016 Regular Session AB 802 (Williams) - Public utilities: energy efficiency savings. ----------------------------------------------------------------- | | | | | | ----------------------------------------------------------------- |--------------------------------+--------------------------------| | | | |Version: September 4, 2015 |Policy Vote: E., U., & C. 8 - 2 | | | | |--------------------------------+--------------------------------| | | | |Urgency: No |Mandate: No | | | | |--------------------------------+--------------------------------| | | | |Hearing Date: September 10, |Consultant: Marie Liu | |2015 | | | | | ----------------------------------------------------------------- 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 AB 802 (Williams) Page 1 of ? 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) AB 802 (Williams) Page 2 of ? 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 AB 802 (Williams) Page 3 of ? 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 AB 802 (Williams) Page 4 of ? 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. AB 802 (Williams) Page 5 of ? -- END --