BILL ANALYSIS Ó
SENATE COMMITTEE ON ENERGY, UTILITIES AND COMMUNICATIONS
Senator Ben Hueso, Chair
2015 - 2016 Regular
Bill No: AB 1330 Hearing Date: 7/13/2015
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|Author: |Bloom |
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|Version: |6/30/2015 As Amended |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant:|Nidia Bautista |
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SUBJECT: Energy Efficiency Resource Standard Act
DIGEST: This bill establishes an annual energy efficiency
resources standard to be met by electrical and gas corporations.
This bill specifically requires electric utilities to achieve
an annual energy savings of not less than 1.5 percent by 2020
and two percent by 2025 of retail sales and requires gas
utilities to achieve energy savings of not less than
three-fourths of one percent by 2020 and not less than one
percent by 2025 of natural gas consumption.
ANALYSIS:
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)
2)Requires the California Public Utilities Commission (CPUC) to
establish policies and procedures by which an entity,
including a community choice aggregator (CCA), may apply to
become administrators for cost-effective energy efficiency and
conservation programs pursuant to §381. (Public Utilities
Code §381.1)
3)Requires electric 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)
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4)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)
5)Requires each local publicly owned electric utility, in
procuring energy to serve the load of its retail end-use
customers, to first acquire all available energy efficiency
and demand reduction resources that are cost effective,
reliable, and feasible. (Public Utilities Code §961.5)
6)Requires the CEC to, every two years, adopt an integrated
energy policy report containing an overview of major energy
trends and issues facing the state, including but not limited
to supply, demand, pricing, reliability, efficiency, and
impacts on public health and safety, the economy, resources
and the environment. (Public Resources Code §25302)
7)Requires the 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)
8)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)
9)Requires the CEC to adopt cost-effective energy and water
efficiency standards for new buildings and appliances.
(Public Resources Code §25402)
10) 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))
11) 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:
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1)Enacts the Energy Efficiency Resources Standard (EERS) Act
electrical and gas corporations to meet annual goals of energy
savings and requires the CPUC, in consultation with the CEC,
to supervise the implementation.
2)Requires each electric utility - investor-owned utilities
(IOU), publicly-owned utilities (POU), and CCA that
administers energy efficiency programs - to establish an EERS
that increases the amount of energy efficiency resources of
the IOU, POU, and CCA so that the minimum amount of
incremental energy savings achieved within its service
territory in any given year amounts to not less than 1.5
percent of its total retail sales of electricity by 2020 and
not less than two percent of its total annual retail sales of
electricity by 2025.
3)Requires the total amount of incremental energy savings to be
determined based upon the average retail sales of electricity
in the immediately preceding three years, measures in gigawatt
hours per year based on annual comparison of the CEC's
integrated energy policy reports, excluding the measured or
estimated sales of electricity associated with electric
vehicle charging and net, round-trip electricity losses
associated with electricity consumer-sited energy storage.
4)Requires each gas utility to establish an EERS that increases
the amount of energy efficiency resources so that the minimum
amount of incremental energy savings achieved within its
service territory in any given year amounts to not less than
.75 of one percent of its total annual system natural gas
retail sales by 2020, and not less than one percent of its
system annual natural gas retail sales by 2025.
5)Requires the total amount of incremental energy savings to be
based on the average natural gas retail sales within its
service territory in the immediately preceding three years,
measured in millions of therms per year based on an annual
comparison of the CEC's integrated energy policy reports,
excluding the estimated sales of natural gas associated with
natural gas vehicle fueling during the preceding three years.
6)Exempts smaller utilities from this act, defined as those with
average annual retail sales of electricity of less or equal to
1,000 gigawatt hours or gas utilities with average annual
retail sales of natural gas of less than or equal to 50
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million therms.
7)Requires the CEC, by July 31, 2017, to establish annual
percentages of peak demand reductions to be achieved through
event-based demand response with consideration of the role of
consumer-sited storage, electric vehicle charging, and
distributed generation resources, with a timetable for
achieving those peak demand reductions.
8)Requires the governing board of each local publicly owned
electric utility and local publicly owned gas utility, in
consultation with the CEC, to be responsible for the
implementation of the act by the utility.
9)Requires the governing board of a CCA that administers energy
efficiency programs, in consultation with CPUC, to be
responsible for implementation of the act by that entity.
10)Requires the CEC in a public stakeholder process and in
consultation with CPUC to determine how the energy savings
goals of the act are measured and reported.
11)Requires the CEC in a public stakeholder process and in
consultation with CPUC to adopt a cost limitation, as
necessary, for each IOU and CCA in order to meet the EERS.
12) Requires the CPUC to require IOUs to achieve these annual
percentages and requires the governing board of each local
publicly owned electric utility and CCA be responsible for
achieving these annual percentages.
13) Requires the benefits, including energy savings achieved,
within disadvantaged communities identified by the California
Environmental Protection Agency be given the highest priority
for energy efficiency activities undertaken. Recognizes that
non-energy benefits of energy efficiency projects for
low-income households.
14) Requires each electrical and gas utility to file with the
CEC a report that analyzes the energy savings achieved within
the utility's service territory during the prior year, divided
by the energy retail sales in the immediately preceding year.
Background
Energy efficient California. Energy efficiency in buildings and
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equipment is used to decrease per capita electricity consumption
which reduces the state's need for new power plants and reduces
the associated environmental impacts, including GHG emissions.
Since the 1970's, California has led the nation in energy
efficiency programs. Largely as a result of the state's nearly
half a century of energy efficiency policies, per-capita energy
use has remained flat, whereas most of the country has
experienced a rise by 33 percent or greater. Energy use has
become even more critical to power homes, schools, government
and businesses. The state has adopted landmark policies to
reduce emissions of greenhouse gases (GHG), namely through the
Global Warming Solutions Act of 2006, with a portfolio of
strategies that includes furthering energy efficiency efforts.
In January 2015, Governor Brown in his State of the State
Address proposed additional goals for reducing GHG emissions in
2030 and 2050 with a three-pronged strategy that includes
doubling the energy efficiency of existing buildings.
Energy loading order. Following the 2001 energy crisis, the
Legislature codified a "loading order" of preferred energy
resources, requiring the IOUs' electricity procurement plans to
first meet unmet resources needs through all cost-effective,
reliable, and feasible energy efficiency and demand response.
The energy loading order was subsequently adopted by the state's
energy agencies and guides the state's energy policies and
decisions according to the following order of priority: (1)
decreasing electricity 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.
California ratepayer-funded energy efficiency. In the late
1970's and early 1980s, California was the first state in the
nation to "decouple" the IOU revenues from sales, thereby
removing a structural disincentive to promote demand-side
management, including energy efficiency.<1> Instead, IOUs are
compensated for the energy efficiency investments via a
calculation, evaluation and assessment conducted by the CPUC.
Ensuring strategies are cost-effective. Today, the CPUC oversees
the IOU's administration of a portfolio of about $1 billion
annually of ratepayer funds for programs that provide financial
incentives for demand-side management, including programs to
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<1> California Public Utilities 2015-16 Budget Documents, p. 27.
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assist customers with energy efficiency such as loans and
rebates for installing energy efficient appliances, lighting,
windows, HVAC systems, whole-house retrofits and others. Energy
efficiency activities funded by ratepayers should be used to
offer programs that serve as alternatives to more costly
supply-side resource options, such as building new generation to
satisfy demand. By keeping energy resource procurement costs as
low as possible through the deployment of a cost-effective
portfolio of resource programs, over time all customers will
share in the resource savings from energy efficiency. This
approach ensures that energy efficiency efforts will help
distribute program benefits more equitably. AB 1330 requires
utilities to make investments to reach the established energy
efficiency goals without reference to ensuring those investments
are cost-effective. This approach would be a significant
departure from standing California policy. If this bill moves
forward, the author should consider making cost-effectiveness a
specific requirement for use of ratepayer funds.
Energy savings goals. The CPUC establishes electricity and
natural gas savings goals. In a September 2004 decision, the
CPUC first provided numerical goals for electricity and natural
gas savings by utility service territory. The CPUC-adopted
energy savings goals are expressed in terms of gigawatt hours,
million-therms, and peak megawatt load reductions. These goals
were informed by the Energy Efficiency Potential and Goals
Study, and have been subsequently updated, and shall continue to
be updated periodically by the CPUC. IOUs should develop their
energy efficiency program portfolios so that they will meet or
exceed these savings goals. The CPUC's intent is for goals to:
(1) be appropriately aggressive; (2) support long-term
procurement planning; (3) encourage a focus on long-term
savings; and (4) be based on the best available information.
Mandating voluntary action. Opponents of this bill argue that
energy efficiency programs are voluntary. However, market
barriers, financial issues, and other considerations affect the
willingness of ratepayers to utilize the programs. The
proponents of this bill argue that utilities control the funding
and, in most cases, the administration of these programs,
therefore utilities should be held to a minimum level of
responsibility for ensuring the programs are resulting in energy
savings. AB 1330 requires each electric utility to increase the
amount of energy efficiency resources in its service territory,
funded by ratepayers to achieve the proposed energy savings
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goals.
Does California have an Energy Efficiency Resource Standard?
According to the sponsors of this bill, roughly two dozen other
states have adopted an EERS. Based on the reports by the
American Council for an Energy-Efficient Economy and National
Renewable Energy Laboratory, California is among the states that
has an EERS. In the case of California, the CPUC establishes
the energy savings goals for each IOU and the CEC works with the
POU who report their annual energy savings goals to the CEC.
The goals are assessed periodically and consider several
factors. As such, existing energy savings goals can be
difficult to pinpoint.
AB 1330 proposes to codify energy savings goals. However, the
basis for the proposed goals is unclear. As a result, it is
difficult to determine whether the goals are aggressive enough,
while still being achievable, to help the state reach its energy
efficiency goals. In the case of the POUs, according to their
own analysis, most POUs would not achieve the proposed goals.
POUs also argue that their local governing boards should be able
to determine their respective energy savings goals.
Demand response. AB 1330 requires the CEC, by July 31, 2017, to
establish annual percentages of peak demand reductions to be
achieved through event-based demand response. Demand response
is end-use electric customers reducing their electricity usage
in a given time period, or shifting that usage to another time
period. The need for demand response as flexible and available
resources continues to grow as an important piece of the grid
integration puzzle. However, demand response need not be
limited to peak demand incidents. Ultimately, a flexible and
dynamic grid will require demand response to be available even
during non-peak times. In fact, the CPUC has opened a
proceeding to examine integrated demand side management to more
effectively coordinate certain activities, including electric
vehicle charging, distributed generation, energy storage, and
others. The author and committee may wish to amend the bill to
better reflect the importance of demand response as a resource
that supports renewable integration, greenhouse gas reduction
and grid reliability.
Prior/Related Legislation
AB 758 (Skinner, Chapter 470, Statutes of 2009) required the CEC
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to develop and implement a comprehensive program to achieve
greater energy savings in existing residential and
nonresidential building stock, including energy assessments,
cost-effective energy efficiency improvements, financing
options, public outreach, and education efforts.
SB 1414 (Wolk, Chapter 627, Statutes of 2014) required utilities
and regulators to include demand response in resource adequacy
plans.
AB 802 (Williams, 2015) allows electrical and gas corporations
to provide incentives for any improvements and count all savings
that show up at the meter as decreased use, including savings
achieved by process changes and maintenance. The bill is
currently under consideration by this committee.
AB 1094 (Williams, 2015) requires the CEC, in consultation with
the CPUC, to conduct an analysis of energy consumption by
plug-in equipment and develop an implementation plan to achieve
specified energy efficiency targets. The bill was held in the
Assembly Committee on Appropriation.
SB 350 (De León, 2015) includes provisions to increase energy
efficiency in buildings to meet 2030 and 2050 GHG reductions
goals. The bill is scheduled to be heard July 13th in the
Assembly Committee on Natural Resources.
FISCAL EFFECT: Appropriation: No Fiscal
Com.: Yes Local: Yes
ASSEMBLY VOTES:
Assembly Floor (46-29)
Assembly Appropriations Committee (12-5)
Assembly Utilities and Commerce Committee (9-5)
SUPPORT:
California Energy Efficiency Industry Council (source)
California Energy Storage Alliance
Energy Solutions
EnerNOC, Inc.
Environmental Defense Fund
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Proteus, Inc., if amended
Small Business California
TELACU, if amended
The Utility Reform Network, if amended
OPPOSITION:
California Municipal Utilities Association
City of Burbank Water and Power
City of Pasadena Water and Power
City of Riverside Public Utilities Department
Imperial Irrigation District
Northern California Power Agency
Pacific Gas and Electric Company, unless amended
Sacramento Municipal Utility District
San Diego Gas and Electric, unless amended
Sempra Energy Utilities, unless amended
Southern California Gas, unless amended
Southern California Edison, unless amended
Southern California Public Power Authority
ARGUMENTS IN SUPPORT: The California Energy Efficiency
Industry Council, the source of this bill, states: "while
California's 'loading order' requires energy efficiency to be
'procured' prior to other resources, the state has no target for
savings achievement which results in less accountability for the
ratepayer funds allocated for the program and undermines the
value of energy efficiency in determining expected load when
procurement is planned. An EERS will bring greater certainty to
planners regarding the minimum level of efficiency to expect
every year."
The author further states: "establishing an EERS 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 percent, increasing our renewable
portfolio to 50 percent by 2030, and reducing our GHG emissions
by 80 percent by 2050."
ARGUMENTS IN OPPOSITION: Opponents to this bill argue that the
goals proposed are arbitrary and don't take into account current
resources, the local economy, demographics, and market potential
of energy efficiency program savings. Furthermore, opponents
state that this bill does not recognize that energy efficiency
programs are voluntary to customers, and utilities can not force
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customers to take advantage of programs. Moreover, customer
participation can be significantly impacted by personal
macroeconomic circumstances beyond the utility's control.
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