BILL ANALYSIS                                                                                                                                                                                                    Ó






                                                                    AB 1330


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          Date of Hearing:  April 20, 2015


                    ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE


                                Anthony Rendon, Chair


          AB 1330  
          (Bloom) - As Introduced February 27, 2015


          SUBJECT:  Energy Efficiency Resource Standard Act


          SUMMARY:  This bill establishes an annual energy efficiency  
          resource standard.  Specifically, this bill:  


          a)Requires each California electric utility to increase the  
            amount of energy efficiency resources annually to be not less  
            than 1.5% per year by 2020, and not less than 2% by 2025,  
            based on average electricity consumption of the immediately  
            preceding three years, measured in gigawatt-hours per year as  
            compared to the Energy Commission's integrated energy policy  
            reports and energy policy reviews made pursuant to Section  
            25302 of the Public Resources Code.


          b)Requires each gas utility to increase the amount of energy  
            efficiency resources of the utility so that the total amount  
            of incremental energy savings achieved in any given year  
            amounts to not less than three-fourths of one percent of total  
            system natural gas consumption by 2020, and not less than one  
            percent of system natural gas consumption by 2025, based on  
            the average natural gas consumption of the immediately  
            preceding three years, measured in millions of therms per year  
            based on comparison of the Energy Commission's integrated  











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            energy policy reports and energy policy reviews made pursuant  
            to Section 25302 of the Public Resources Code.


          c)Requires the California Public Utilities Commission (CPUC) to  
            require Pacific Gas and Electric Company, Southern California  
            Edison Company, and San Diego Gas and Electric Company jointly  
            achieve a reduction in nonemergency, event-based demand  
            response of seven percent by 2020 and ten percent by 2025, as  
            measured by the sum of their peak demands.


          d)Requires that not less than 25 percent of the energy savings  
            of an electric utility or gas utility shall come from  
            disadvantaged communities identified by the California  
            Environmental Protection Agency pursuant to Section 39711 of  
            the Health and Safety Code.





          e)Requires each electric utility and gas utility to file annual  
            reports with the California Energy Commission that analyzes  
            the energy savings achieved by the utility during the prior  
            year, divided by the energy consumption in the immediately  
            preceding year.
          EXISTING LAW:  



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

          6)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  











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            §454.5 (b)(9)(C)) 

          7)Requires the CPUC to establish targets for all potentially  
            achievable cost-effective electricity and gas efficiency  
            savings.  (Public Utilities Code §454.55 and 454.56)



          8)Requires each local publicly owned electric utility, in  
            procuring energy to serve the load of its retail end-use  
            customers, shall first acquire all available energy efficiency  
            and demand reduction resources that are cost effective,  
            reliable, and feasible.  (Public Utilities Code §9615)



          9)Requires the California Energy Commission (CEC) to develop a  
            statewide estimate of all potentially achievable  
            cost-effective electricity and natural gas savings, and  
            establish targets for statewide annual energy efficiency  
            savings, and demand reduction for the next 10-year period.   
            (Public Resources Code §25310)

          10)Requires the CEC to continuously carry out studies, technical  
            assessments, research projects, and data collection directed  
            to reducing wasteful, inefficient, unnecessary, or uneconomic  
            uses of energy, including improved appliance efficiency.   
            (Public Resources Code §25401)

          11)Requires the CEC to adopt cost-effective energy and water  
            efficiency standards for new buildings and appliances.   
            (Public Resources Code §25402)

          12)Prohibits the sale of new appliances that do not meet the  
            energy and water efficiency standards adopted by the CEC.   
            (Public Resources Code §25402(c)(2))














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          13)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)

          FISCAL EFFECT:  Unknown


          COMMENTS:  


           Author's Statement  .  "Establishing an energy efficiency resource  
          standard will be a critical component in meeting Californian's  
          energy needs while at the same time meeting the Governor's goals  
          of increasing building efficiency by 50%, increasing our  
          renewable portfolio to 50% by 2030, and reducing our greenhouse  
          gas emissions by 80% by 2050." 





           1)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:











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                     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)California Ratepayer-funded Energy Efficiency.   The CPUC  
            regulates ratepayer-funded energy efficiency programs.  The  
            CPUC works with the investor-owned utilities, other program  
            administrators, and vendors to develop programs and measures  
            to transform technology markets within California using  
            ratepayer funds.  The program requires that the portfolio of  
            activities be cost effective.  The 2013-2014 energy efficiency  
            program budgets are slightly more than $2 billion.  This does  
            not include additional funding to support low income  
            households, which includes a billing discount and no-cost  
            energy efficiency improvements and appliances for qualified  
            low income households.
            Ratepayer-funded energy efficiency budgets are used to provide  
            incentives to encourage energy efficiency improvements over  
            and above current state energy efficiency regulations, conduct  
            research on areas where state efficiency standards can be  
            increased, measure and evaluate results, marketing and  
            outreach; government partnerships, and financing programs.


            California's publicly owned utilities administer similar  
            programs also funded by their ratepayers.


           2)California Energy Commission Energy Efficiency Programs.   The  











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            CEC researches and ultimately adopts and enforces state  
            standards for building and appliance efficiency.  The CEC  
            establishes first that its requirements are cost effective  
            before the requirements take effect.  In some limited areas,  
            the CEC is preempted from establishing standards if the  
            Federal government has already enacted standards. 



           3)Will AB 1330 require more than Current Energy Efficiency  
            Goals?   It is a challenge to identify California's energy  
            efficiency goals. As a result, it is not entirely clear  
            whether the requirements of AB 1330 are in addition to  
            inclusive of current state energy efficiency programs and  
            initiatives.  It is also not clear whether AB 1330 will  
            require that the goals be met with cost-effective energy  
            efficiency investments.



            In a recent filing in the CPUC's Integrated Demand Side  
            Resource Planning Proceeding, the Natural Resources Defense  
            Counsel (NRDC) described CPUC current practice with respect to  
            setting energy efficiency goals:


               The efficiency incorporated into procurement planning is  
               determined in a different proceeding - the general  
               efficiency proceeding - based on an efficiency potential  
               study that considers how much efficiency is available above  
               what would happen anyway (aka "incremental" to business as  
               usual).  The Commission then determines how much the  
               utilities would be responsible for reaching and sets that  
               as their goals, which are then integrated into procurement  
               planning. 


               The current goals are based on the "mid-scenario" in the  
               potential study, which by definition means the  











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               "high-scenario" identified more efficiency (which is  
               therefore "incremental" to the procurement assumptions).  
               Furthermore, the utilities are held responsible to meet  
               these efficiency goals no matter what other efficiency  
               efforts they take."


            In the CEC's Integrated Energy Policy Report (IEPR),  the CEC  
            energy demand forecast "consists of two parts: a baseline  
            forecast, which includes energy efficiency savings from  
            initiatives already in place or approved, and a forecast of  
            future energy efficiency savings, referred to as additional  
            achievable energy efficiency (AAEE) savings. Combinations of  
            the two parts yield a "managed" forecast for resource planning  
            purposes."<1>


             The author may wish to consider clarifying that the standard  
            is a minimum and inclusive of all current energy efficiency  
            programs, and that the Energy Commission should establish cost  
            containment, if necessary, for each retail seller of  
            electricity or natural gas.


            4)Demand Response (DR).   AB 1330 establishes a requirement to  
            procure nonemergency, event-based demand response of seven  
            percent by 2020 and ten percent by 2025, as measured by the  
            sum of their peak demands.  Demand response is end-use  
            electric customers reducing their electricity usage in a given  
            time period, or shifting that usage to another time period, in  
          ---------------------------
          <1> CALIFORNIA ENERGY DEMAND UPDATED FORECAST, 2015-2025,  
           http://www.energy.ca.gov/2014publications/CEC-200-2014-009/CEC-20 
          0-2014-009-CMF.pdf  
















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            response to a price signal, a financial incentive, an  
            environmental condition, or a reliability signal.  



             The CPUC currently authorizes the investor owned utilities to  
            offer a variety of DR programs, including, but not limited to,  
            critical peak pricing, peak day pricing, 'smart rate'  
            discounts, 'smart air conditioning' discounts, Summer Savings,  
            Flex Alert, a DR aggregator program, demand bidding program,  
            base interruptible program, and more.





            The CPUC recently opened a proceeding to examine Integrated  
            Demand Side Management (ISDM) to more effectively coordinate  
            certain electric vehicle, DR, distributed generation, energy  
            efficiency, distributed energy storage, marketing education  
            and outreach, smart grid, rate design, and water-energy  
            issues.


            The CPUC intends to enable the utilities, other  
            administrators, and electric market actors to offer a wide  
            portfolio of demand modifying technologies that may be best  
            tailored to the specific characteristics of individual  
            customers.  (Demand-side management resources include DR as  
            well as energy efficiency, distributed generation and storage,  
            smart grid, water-energy measures, electric vehicle hardware,  
            and innovative rate design.)


            Ultimately the CPUC may propose goals and potential,  
            cost-effectiveness methods, funding levels and sources, and  
            marketing/outreach/education programs, and a shareholder  
            incentive mechanism.












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            It is unclear the extent to which the DR provisions in AB 1330  
            are over and above existing programs or how the goal in AB  
            1330 interacts with existing programs. 





             The author may wish to strike the language related to DR and  
            replace it with language specifying that the CPUC and publicly  
            owned utilities shall establish and report on an annual target  
            for demand response.


            5)Requires not less than 25% of energy savings by a utility to  
            occur in disadvantaged communities.   Current CPUC-authorized  
            programs provide free energy efficiency upgrades of appliances  
            and certain building components for low-income households.   
            This provision in AB 1330 may assist with directing energy  
            efficiency assistance to non-residential customers in  
            disadvantaged communities, particularly small food markets,  
            community centers, homeless shelters, etc.  



             Poverty is one of the components used in determining whether a  
            region should be considered a disadvantaged community.<2> 


            The CPUC recently issued a report showing that low income  
            households typically use less energy than higher income  
            households: "the combined usage of households in moderate  
            [income] and high [income] areas is almost four times larger  
            in the summer (five times larger in the winter) than the  




            --------------------------



            --------------------------
          <2>  http://oehha.ca.gov/ej/pdf/042313CalEnviroScreen1.pdf  











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            combined summer usage in very low and low income areas." <3>


            If low income households use less energy than moderate and  
            high income households, it is unclear whether 25% of energy  
            savings can be obtained in disadvantaged communities.


             The author may wish to consider an amendment to specify that  
            all energy savings first occur in disadvantaged communities.


            6)Clarifying amendments.



            The author may wish to:





                 Define "energy savings" as a reduction in use of  
               electricity or natural gas.
                 Replace electricity utility with retail seller of  
               electricity to include non-utility electricity providers.


                 Insert "its" in Section 8045 to clarify that the  
               percentage goals apply to each retail seller of  
               electricity's service area rather than a statewide goal.


                 Clarify that the standard is based on sales rather than  
               consumption.


             --------------------------
          <3>  
          http://www.cpuc.ca.gov/NR/rdonlyres/8AEF5361-FC3B-4518-A88A-72E30 
          10263A4/0/PPDComparativeAnalysisofUtilityServicesRatesinCAFinal2. 
          pdf  










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                 Strike "and energy policy reviews" to remove ambiguity.


                 Strike "nonemergency" in Section 8047 to clarify the  
               requirements of this section.





          1)Related Legislation.



             AB 802 (Williams, 2015) requires the CPUC to consider total  
            energy savings in evaluating the cost effectiveness of energy  
            efficiency measures.





            SB 350 (De León, 2015) requires the CEC to adopt an update to  
            its existing buildings program in furtherance of achieving a  
            doubling of energy efficiency in buildings, by 


            January 1, 2030.





            SB 723 (Pavley, 2015) requires the CPUC to address energy  
            efficiency implementation at United States Armed Forces bases  
            and facilities.














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            SB 1414 (Wolk, Chapter 627, Statutes of 2014) requires the  
            CPUC to specify methods that allow demand response to be  
            included in electricity resource adequacy requirements.


           


          2)Suggested Amendments.
           
            SECTION 1.  Chapter 7 (commencing with Section 8400) is added  
            to Division 4.1 of the Public Utilities Code, to read:

            CHAPTER 7. Energy Efficiency

            8400.  (a) This chapter shall be known, and may be cited, as  
            the Energy Efficiency Resource Standard Act.
            (b) The commission, in consultation with the Energy  
            Commission, shall be responsible for supervising the  
            implementation of this chapter by electrical corporations and  
            gas corporations.
            (c) The governing board of each local publicly owned electric  
            utility and local publicly owned gas utility, in consultation  
            with the Energy Commission, shall be responsible for the  
            implementation of this chapter by the utility.
            (d) The Energy Commission shall, in a public stakeholder  
            engagement process, determine how the energy savings goals of  
            this chapter are measured and reported.

            8401.  For purposes of this chapter, the following terms have  
            the following meanings:
            (a) "Electric utility" means an electrical corporation or  
            local publicly owned electric utility serving retail end-use  
            customers in California.
            (b) "Gas utility" means a gas corporation or local publicly  
            owned gas utility serving retail end-use customers in  
            California.











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             (c) "Energy savings" means a reduction in electricity use in  
            kilowatthours or in fossil fuel use in thermal unit(s).
             8405.  (a)  Each  electric utility   retail seller of electricity   
            shall establish an energy efficiency resource standard that  
            shall increase the  minimum  amount of energy efficiency  
            resources,  inclusive of all of its current energy efficiency  
            activities,  of the utility so that the total amount of  
            incremental energy savings achieved in any given year amounts  
            to not less than 11/2 percent of  its  total system electricity  
            consumption by 2020, and not less than 2 percent of  its  total  
             electricity consumption   retail sales  by 2025.  The total  
            amount of incremental energy savings shall be determined based  
            upon the average  electricity consumption   retail sales of  
            electricity  of the immediately preceding three years, measured  
            in gigawatthours per year based on comparison of the Energy  
            Commission's integrated energy policy reports and energy  
            policy reviews  made pursuant to Section 25302 of the Public  
            Resources Code.  
             (b)  The Energy Commission, in consultation with the  
            commission, shall adopt a cost limitation, as necessary, for  
            each retail seller of electricity, for meeting the  
            requirements of this section.
             8406. The commission shall  establish an annual specified  
            percentage of peak demand that shall be achieved through  
            event-based demand response and  require that  Pacific Gas and  
            Electric Company, Southern California Edison Company, and San  
            Diego Gas and Electric Company jointly achieve a reduction in  
            nonemergency, event-based demand response of 7 percent by 2020  
            and 10 percent by 2025, as measured by the sum of their peak  
            demands.   retail sellers of electricity achieve that annual  
            percentage.
             8410. Each gas utility shall establish an energy efficiency  
            resource standard that shall increase the  minimum  amount of  
            energy efficiency resources,  inclusive of all of its current  
            energy efficiency activities  , of the utility so that the total  
            amount of incremental energy savings achieved in any given  
            year amounts to not less than three-fourths of 1 percent of  
            its  total system natural gas consumption by 2020, and not less  
            than 1 percent of  its  system  retail  natural gas  consumption   











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             sales  by 2025.  The total amount of incremental energy savings  
            shall be determined based upon the average  retail  natural gas  
             consumption   sales  of the immediately preceding three years,  
            measured in millions of therms per year based on comparison of  
            the Energy Commission's integrated energy policy reports  and  
            energy policy reviews  made pursuant to Section 25302 of the  
            Public Resources Code.

            8415. (a)  Not less than 25 percent of   All   the  energy savings  
            of an electric utility or gas utility shall  first  come from  
            disadvantaged communities identified by the California  
            Environmental Protection Agency pursuant to Section 39711 of  
            the Health and Safety Code.
             (b) Each electric utility and gas utility shall annually file  
            with the Energy Commission, a report that analyses the energy  
            savings achieved by the utility during the prior year, divided  
            by the energy consumption in the immediately preceding year.

           3)Support/Opposition.


             The sponsors of AB 1330 state that this "standard would save  
            more than $10 billion dollars in utility bills over the period  
            2015 through 2030, and that it would save on the order of 33  
            MMT of carbon over the same period.  It is a tangible way to  
            actually measure efficiency's progress toward reducing  
            emissions."


            TURN supports AB 1330 and expresses concern about how it fits  
            into current statute which requires procuring all potentially  
            achievable cost effective electric and natural gas savings.
                          

            EDF suggests an amendment to the DR provisions to require that  
            DR be available to shift demand at times when there is an  
            abundance of solar and avoid renewable curtailment.













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            The Northern California Power Agency and the California  
            Municipal Utility Association opposes AB 1330 because energy  
            savings are customer driven; load is not growing consistent  
            with improving efficiency; and concerns regarding  
            over-generation of electricity during peak periods of the day.


            The Independent Energy Producers oppose establishing a  
            carve-out for demand response.


          REGISTERED SUPPORT / OPPOSITION:




          Support


          Bloom


          California Energy Efficiency Industry Council (sponsor)


          Center for Sustainable Energy (if amended)


          Environmental Defense Fund (if amended)


          Natural Resources Defense Counsel (if amended)


          TURN (if amended)















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          Opposition


          California Municipal Utilities Association


          Independent Energy Producers


          Northern California Power Agency




          Analysis Prepared by:Sue Kateley / U. & C. / (916) 319-2083