BILL ANALYSIS                                                                                                                                                                                                    



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

          AB 1330 (Bloom) - Energy Efficiency Resource Standard Act
          
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          |Version: August 18, 2015        |Policy Vote: E., U., & C. 7 - 3 |
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          |Urgency: No                     |Mandate: Yes (see staff         |
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          |Hearing Date: August 24, 2015   |Consultant: Marie Liu           |
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          This bill meets the criteria for referral to the Suspense File. 


          Bill  
          Summary:  This bill would create an energy efficiency resource  
          standard for electricity and gas that would increase the amount  
          of energy efficiency resources available to specified targets in  
          2020 and 2025.


          Fiscal  
          Impact:  
           Ongoing costs of $700,000 annually to the Energy Resources  
            Program Account (General Fund) for the CEC to adopt cost  
            limitations for each utility.

           Ongoing cost pressures of $850,000 to the Energy Resources  
            Program Account (General Fund) for the CEC to collect, review,  
            and verify utility reports.

           Annual costs of $700,000 for two years to the Energy Resources  
            Program Account (General Fund) for the CEC to establish peak  







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            demand reduction procurement goals.

           Ongoing costs of approximately $420,000 annually to the Public  
            Utilities Reimbursement Account (special) for overseeing IOU  
            and CCA compliance with energy efficiency standard  
            requirements.



          Background:  IEPR report. The CEC is required to adopt an integrated energy  
          policy report every two years that gives 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.
          Energy Efficient California.  Energy efficiency in buildings and  
          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  








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          peak hours; (3) meeting new energy generation needs with  
          renewable resources; and (4) meeting new energy generation needs  
          with clean fossil-fueled generation.


          Proposed Law:  
            Electricity: This bill would create the Energy Efficiency  
          Resource Standard Act (act) that would require all electrical  
          utilities to establish an energy efficiency resource standard to  
          increase the amount of energy efficiency resources funded by its  
          customers to at least 1.5% of its total retail sales by 2020 and  
          at least 2% by 2025. The total amount of energy savings would be  
          based on the average retail sales of electricity in the past  
          three years excluding the estimates sales of electricity  
          associated with electric vehicle charging and net, round-trip  
          electricity losses associated with consumer-sited energy  
          storage. CCAs that elect to administer energy efficiency  
          programs for its consumers would also be subject to this  
          requirement. This requirement would not apply to an electrical  
          utility or CCA if its average annual retail sales in the  
          preceding three years was less than 1,000 gigawatthours (GWH).  
          The CEC would be required to adopt a cost limitation for each  
          utility and CCA.
          This bill would also require the CEC, in consultation with the  
          CPUC, to establish an annual procurement goal for demand  
          response that would be imposed on each electrical utility and  
          CCA by July 31, 2017. The CPUC would be required to oversee  
          compliance of this goal by electrical corporations. The  
          governing board of each POU and CCA would be responsible for  
          achieving its goal.


          Natural gas: This act would also require that all gas utilities  
          to establish an energy efficiency resource standard that  
          increases the amount of energy efficiency resources to at least  
          0.75% of its total retail sales by 2020 and at least 1% by 2025.  
          As with the electricity requirement, the amount of incremental  
          savings would be determined by the average retail sales of  
          natural gas within its service territory in the immediately  
          preceding three years, excluding the sales of natural gas  
          associated with natural gas vehicle fueling. The CEC would be  
          required to adopt a cost limitation for each gas utility. The  
          CPUC would be responsible for overseeing the implementation of  
          this requirement by gas utilities. The governing board of a  








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          publically owned gas utility, in consultation with the CEC would  
          be responsible for achieving this goal.


          This bill would require utilities to prioritize energy  
          efficiency activities under this act that benefit disadvantaged  
          communities. 


          Every electrical and gas utility would be required to annually  
          report to the CEC on the energy savings divided by the energy  
          retail sales for the prior year.




          Staff  
          Comments:  To adopt the cost limitations for each electric  
          utility and CCA subject to the bill, the CEC anticipates needing  
          5 positions to review and incorporate load forecasts for each  
          utility that will be used as the basis for comparison for energy  
          efficiency savings and to review costs of energy efficiency  
          programs at an annual ongoing cost of $700,000.
          To collect, review, and verify the annual reports submitted by  
          the electrical and gas utilities, the CEC anticipates needing  
          six positions at an annual ongoing cost of $850,000. These  
          positions would be responsible for acquiring quantitative  
          information about benefits to disadvantaged communities and  
          estimates of non-energy benefits for the utility's energy  
          efficiency programs. Staff notes that the bill does not require  
          that the CEC take any action with the report, especially since  
          the CPUC and the governing boards are responsible for IOU and  
          POU compliance respectively. The bill also does not explicitly  
          require that the report have information about benefits to  
          disadvantaged communities and non-energy benefits. However, it  
          can be presumed that this information is desirable in the  
          report. As such, staff considers these costs as cost pressures.


          To establish the annual procurement goal for demand response,  
          the CEC estimates that it would need approximately five  
          positions for two years at an annual cost of $700,000. Staff  
          notes that the CEC may also have periodic costs should it  
          determine that the goals need to be updated. The bill is silent  








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          in regard to upgrades to the goal.


          The CPUC would also have costs under this bill to oversee  
          compliance of the bill's requirements by IOUs and CCAs. The CPUC  
          is currently reevaluating its costs but it had previously  
          estimate that it would need approximately $420,000 annually to  
          fund four positions for its new oversight responsibilities.  
           Staff notes  that while the CPUC is responsible for overseeing  
          IOU and CCA compliance, the bill requires all utilities to file  
          annually with the CEC n their progress.


          Staff notes that the bill is unclear on how energy efficiency is  
          to be measured. In 8400(d) the bill requires the EC to  
          determine how the energy savings goal in the chapter are to be  
          measured and reported. However, the bill states in 8405(a) that  
          the standard is to increase the amount of energy efficiency  
          activities, which suggests that the goal set in the bill will be  
          measured by the amount of the utilities' energy efficiency  
          budgets. Later in 8405(a), the bill requires that the amount of  
          incremental energy savings be determined based on the average  
          retail sales of electricity, which suggests that the goal is to  
          be measured by a reduction of energy used.  Staff recommends  that  
          the bill be clarified as to its intent on how energy efficiency  
          is to measured, as it is likely to impact implementation costs.  
          How the energy efficiency standard is measured will also impact  
          ratepayer impacts, which are a concern to state costs to the  
          extent that the state is a ratepayer itself.


          This bill constitutes a state mandate as it creates a new crime.  
          However, under the California Constitution, costs associated  
          with this mandate are not reimbursable. This bill so makes  
          requirement of local agencies that can be recovered by service  
          charges or fees, which are also not reimbursable costs.




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