BILL ANALYSIS Ó
SENATE COMMITTEE ON ENERGY, UTILITIES AND COMMUNICATIONS
Senator Ben Hueso, Chair
2015 - 2016 Regular
Bill No: AB 1330 Hearing Date: 6/27/2016
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|Author: |Bloom |
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|Version: |6/15/2016 As Amended |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant:|Nidia Bautista |
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SUBJECT: Energy efficiency
DIGEST: This bill would require the California Public
Utilities Commission (CPUC) to ensure that there are sufficient
monies available for electrical and gas corporations to meet
those efficiency targets, and, if the CPUC finds that additional
monies are necessary to meet those targets, to increase
available moneys up to 20 percent per year until the moneys
available for energy efficiency savings and demand reduction
doubles from the amount authorized on January 1, 2016.
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)
1)Requires electrical 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 (b)(9)(C))
2)Requires the CPUC to authorize electrical or gas corporations
to provide financial incentives, rebates, technical
assistance, and support to their customers to increase the
AB 1330 (Bloom) Page 2 of ?
energy efficiency of existing building, including measures to
bring the buildings to conformity with, or exceed, the
requirements of Title 24 building codes. Authorizes
electrical and gas corporations to count the energy savings
achieved through bringing buildings to code towards overall
energy efficiency goals or targets established by the CPUC,
unless otherwise determined. (Public Utilities Code §381.2
(b))
2)Requires the CPUC to identify all potentially achievable
cost-effective electricity and natural gas efficiency savings
and to establish energy efficiency procurement targets and
ratepayer-funded programs for investor-owned utilities (IOUs).
Requires a gas corporation to first meet its unmet resource
needs through all available natural gas efficiency and demand
reduction resources that are cost effective, reliable, and
feasible. (Public Utilities Code §§454.55 and 454.56.)
3)Requires the California Energy Commission (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)
4)Requires the CEC, in collaboration with the CPUC and local
publicly owned electric utilities, to, on or before November
17, 2017, establish annual targets for statewide energy
efficiency savings and demand reduction that will achieve a
cumulative doubling of statewide energy efficiency savings and
electricity and natural gas final end uses of retail customers
by January 1, 2030. (Public Resources Code §25302.2)
This bill:
1)Requires the CPUC to ensure that there are sufficient monies
available to electrical and gas corporations to meet the
efficiency targets established for an electrical and gas
corporations.
2)Requires the CPUC, if it finds that additional monies are
necessary, to increase available monies up to 20 percent per
year until the monies available for energy efficiency savings
and demand reduction doubles from the amount authorized on
AB 1330 (Bloom) Page 3 of ?
January 1, 2016.
Background
Energy loading order. The "loading order" guides the state's
energy policies and decisions according to the following order
of priority: (1) decreasing energy 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. This policy has been
adopted by the energy agencies - the CEC and CPUC - and its
principles guide all energy programs.
Energy efficiency funded programs. Consistent with the loading
order, statute requires both electrical and gas IOUs to meet
unmet resource needs with all available energy efficiency and
demand reduction that is cost-effective, reliable and feasible.
The CPUC uses these criteria to establish energy efficiency
targets for the IOUs. To achieve these targets, the IOUs (and,
in some cases, community choice aggregators) administer energy
efficiency programs with ratepayer funds approved by the CPUC.
Currently funded at about $1 billion per year, the programs
include a portfolio of financial incentives, loans, and rebates
for installing energy efficient appliances, lighting, windows,
HVAC systems, whole-house retrofits, and sector-specific
efforts.
Doubling energy efficiency savings. The passage of SB 350 (De
León, Chapter 547, Statutes of 2015), enacts the Clean Energy
and Pollution Reduction Act of 2015, which establishes targets
to increase retail sales of renewable electricity to 50 percent
by 2030 and double energy efficiency savings in electricity and
natural gas uses by 2030. Under the statute, the CEC, in
consultation with the CPUC and local publicly owned utilities,
must establish annual targets for statewide energy efficiency
savings and demand reduction through a public process that will
achieve a cumulative doubling of statewide energy efficiency
savings in electricity and natural gas final end uses of retail
customers by January 1, 2030. In furtherance of that effort,
the targets must be established by November 1, 2017. As of the
date of this analysis, the CEC has begun to initiate the public
process to establish the targets, but the final outcome is not
expected for several months - and possibly a year.
AB 1330 (Bloom) Page 4 of ?
Expanded opportunities for energy efficiency. The passage of AB
802 (Williams, Chapter 590, Statutes of 2015), has further
expanded the opportunity for energy efficiency IOU-funded
projects. Specifically, this bill requires the CPUC, by
September 1, 2016, to authorize an IOU to provide incentives for
the cost of energy efficiency programs based on all estimated
energy savings, including energy savings from bringing existing
buildings into compliance with mandatory energy efficiency codes
for existing buildings issued by the CEC, and authorizes an IOU
to recover the costs in rates. The statute provides that the
energy efficiency measures described above may include savings
and reductions from measures to conform a building with existing
energy efficiency regulation, as well as certain operational,
behavioral, and retro commissioning activities. As a result, for
the first-time, IOU may get credit towards achieving their
energy efficiency targets by funding measures to bring existing
buildings to the building code. Prior to the recent change in
statute, IOUs would only receive credit for funding energy
efficiency measures that would bring buildings above the
building code. As a result, IOU funds would be limited to
projects where building owners of existing buildings could
afford the measures to get the building up to code, but augment
with IOU funding for anything above code. The change in policy
in AB 802 is providing expanded opportunities for energy
efficiency measures, including in what many argued would be the
most cost-effective measures.
Cost-effectiveness. Over the past 10-plus years, the CPUC have
increased energy efficiency budgets. This ramp-up in spending
comports with Public Utilities Code §381's mandate that we
"allocate funds spent to programs that enhance system
reliability and provide in-state benefits including: (1)
cost-effective energy efficiency and conservation activities."
Section 381 expressly limits the CPUC to allocating funds to
"cost-effective" activities. The CPUC has applied this approach
across an IOU's portfolio of programs, rather than all
individual programs, must be cost-effective. In practice this
means that many programs within portfolios are not cost
effective, including "non-resource" programs (e.g., workforce
education and training) are not cost-effective. They are
nonetheless funded so long as the overall portfolio is
cost-effective.
Current process. Currently the CPUC's process approves a 10
year authorization of funding for IOU energy efficiency and
AB 1330 (Bloom) Page 5 of ?
demand reduction investments, known as a rolling portfolio.
Rolling portfolios represent a 10 year authorization for
activities, with annual reviews of progress and effectiveness
and annual updates/true ups needed for specific aspects of the
portfolio (savings estimates, goals, evaluation results) through
a formal filing with the CPUC via a public and stakeholder
process. The rolling portfolio mechanism was adopted to smooth
out the start stop nature of a three year authorization,
revision, re-adoption by the CPUC. The CPUC is currently in its
first year of implementing rolling portfolios and still learning
about how to improve the effort.
Is a bill necessary? This bill would require the CPUC to
authorize more ratepayer funds for energy efficiency and demand
reduction activities should the CPUC find that an IOU does not
have sufficient funding to attain CPUC- mandated goals. This
bill would authorize the CPUC to increase the amount of
ratepayer funds used for energy efficiency by twenty percent
each year, until the amount doubles what was authorized as of
January 1, 2016 - roughly $980, 000,000. As a result, the CPUC
could potentially increase the amount invested in these programs
to nearly two billion dollars within five years. However, the
CPUC already has authority to increase the amount funded for
energy efficiency. Additionally, as mentioned above, many of
the recent changes from SB 350 and AB 802 are in the initial
stages of being implemented. It's unclear why a bill would be
needed at this time. Furthermore, the process to establish the
goals to double energy efficiency savings by 2030 has only
recently been initiated and the results will not be finalized
until 2017. This bill also only addresses the IOU energy
efficiency measures, but says nothing about publicly-owned
utilities who must also contribute to the state's overall energy
efficiency savings.
Cap on investments or an inducement to spend more? The sponsors
of this bill suggest this bill is a cap on CPUC authority to
invest in energy efficiency. It is true that this bill does cap
the amount the CPUC can authorize in energy efficiency and
demand reduction programs - by no more than an additional 20
percent annually up to reaching double what was authorized as of
January 1, 2016. However, considering that doubling the amount
currently invested would result in nearly $2 billion of
ratepayer funded programs, the intention of this bill is likely
not to cap, but to increase the amount invested.
AB 1330 (Bloom) Page 6 of ?
Prior/Related Legislation
AB 802 (Williams, Chapter 590, Statutes of 2015) required the
CPUC to authorize electrical corporations or gas corporations to
provide incentives and assistance for measures to conform a
building to CEC's energy efficiency standards for existing
buildings and to allow IOUs to recover in rates the reasonable
costs of those incentives and assistance.
SB 350 (De León, Chapter 547, Statutes of 2015) enacted the
Clean Energy and Pollution Reduction Act of 2015, which
establishes targets to increase retail sales of renewable
electricity to 50 percent by 2030 and double energy efficiency
savings in electricity and natural gas uses by 2030.
FISCAL EFFECT: Appropriation: No Fiscal
Com.: Yes Local: No
SUPPORT:
California Energy Efficiency Industry Council (Source)
Advanced Energy Economy
California Building Industry Association
California Business Properties Association
Mission:data Coalition
OPPOSITION:
None received
ARGUMENTS IN SUPPORT: According to the author:
The CPUC to increase funding which could have the impact of
increasing rates. However, the CPUC would continue to be
constrained by the rigorous cost-effectiveness requirement
which currently governs expenditures on energy efficiency.
The author would submit that while California has the
highest rates in the nation, it does not have the highest
bills - in part because rates are invested in energy
efficiency which has the impact of lowering consumer bills
because it reduces the need to purchase power.
AB 1330 (Bloom) Page 7 of ?
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