BILL ANALYSIS Ó SENATE COMMITTEE ON APPROPRIATIONS Senator Ricardo Lara, Chair 2015 - 2016 Regular Session AB 1330 (Bloom) - Energy efficiency ----------------------------------------------------------------- | | | | | | ----------------------------------------------------------------- |--------------------------------+--------------------------------| | | | |Version: August 9, 2016 |Policy Vote: E., U., & C. 7 - | | | 3, E., U., & C. 6 - 2 | | | | |--------------------------------+--------------------------------| | | | |Urgency: No |Mandate: No | | | | |--------------------------------+--------------------------------| | | | |Hearing Date: August 16, 2016 |Consultant: Narisha Bonakdar | | | | ----------------------------------------------------------------- This bill meets the criteria for referral to the Suspense File. However, it was referred to the Committee pursuant to Senate Rule 29.10 (b), which only provides the option to (1) hold the bill, or (2) return the bill as approved by the Committee to the Senate floor. Bill Summary: AB 1330 requires the California Public Utilities Commission (CPUC) to ensure that sufficient monies are available for electrical and gas corporations to meet efficiency targets. Fiscal Impact: Unknown, likely minor, costs (Utilities Reimbursement Account) to the CPUC to determine the amount of ratepayer funds necessary to meet energy efficiency targets. Unknown, potentially significant costs, to the state as a ratepayer. (See staff comments) Background: AB 1330 (Bloom) Page 1 of ? 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 California Energy Commission (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 investor owned utilities (IOU) 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. SB 350 (De León, Chapter 547, Statutes of 2015), enacted the Clean Energy and Pollution Reduction Act of 2015, which established 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 that will achieve a cumulative doubling of statewide energy efficiency savings in electricity and natural gas by January 1, 2030. The targets must be established through a public process. In furtherance of that effort, the targets must be established by November 1, 2017. Cost-effectiveness. Over the past 10-plus years, the CPUC has increased energy efficiency budgets. This ramp-up in spending comports with Public Utilities Code §381's mandate that the CPUC AB 1330 (Bloom) Page 2 of ? allocate funds to "cost-effective" activities. The CPUC has applied this approach across an IOU's portfolio of programs, rather than each individual program. As such, programs that are not cost-effective, including "non-resource" programs (e.g., workforce education and training), are funded so long as the overall portfolio is cost-effective. Current process. Currently, the CPUC approves a 10-year authorization of funding for IOU energy efficiency and 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. Proposed Law: This bill requires the CPUC to ensure that sufficient monies are available to electrical and gas corporations to meet the efficiency targets established for electrical and gas corporations. Staff Comments: This bill could result in the CPUC increasing the amount of ratepayer funds used for energy efficiency. The state represents approximately one to two percent of the state's electricity use. To the extent that rates are increased to fund energy efficiency programs, this bill will result in costs to the state as a ratepayer. AB 1330 (Bloom) Page 3 of ? -- END --