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)








          AB 1330 (Bloom)                                       PageB of?
          

          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:










          AB 1330 (Bloom)                                       PageC of?
          
          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  









          AB 1330 (Bloom)                                       PageD of?
          
            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  









          AB 1330 (Bloom)                                       PageE of?
          
          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  



          ---------------------------
          <1> California Public Utilities 2015-16 Budget Documents, p. 27.








          AB 1330 (Bloom)                                       PageF of?
          
          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  









          AB 1330 (Bloom)                                       PageG of?
          
          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  









          AB 1330 (Bloom)                                       PageH of?
          
          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









          AB 1330 (Bloom)                                       PageI of?
          
          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  









          AB 1330 (Bloom)                                       PageJ of?
          
          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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